What this ETF is trying to do

The Fidelity Investment Grade Securitized ETF (FSEC) is an exchange-traded fund listed on the NYSE. Based on its name, it focuses on investment-grade securitized assets.

What the numbers show

When looking at an ETF, it is important to look at two different types of returns: price return and total return.

• Price return only tracks how much the share price moves up or down.

• Total return tracks the share price movement plus any cash distributions (dividends) paid out to investors.

Currently, FSEC is priced at $41.86. An estimated price from roughly one year ago was approximately $44.28.

Over the last year, the one-year price return was -5.47%. However, the one-year total return was -1.19%. This difference exists because the total return includes the cash distributions paid during that time.

Looking at more recent data, the year-to-date (YTD) price return is -5.14%, while the YTD total return is -2.42%. Over a longer period, the three-year total return was 16.27%, even though the three-year price return was 3.94%.

Income and distribution explanation

Some investors look at ETFs for regular cash payments, known as distributions. FSEC has a distribution yield of approximately 4.65%. This means the amount of cash distributed is about 4.65% of the ETF's price.

These distributions are usually paid out monthly. In the last 12 months, there were 13 payouts. It is important to remember that a high distribution yield does not guarantee that an investor will earn that same percentage as a total return.

NAV erosion explanation

"NAV erosion" is a term used when the value of the underlying assets in an ETF decreases. While a falling share price does not always mean the Net Asset Value (NAV) has dropped, it can be a sign of price deterioration.

StockValueFinder uses an erosion-risk score to measure this. FSEC has an erosion score of 75, which is labeled as "mild price erosion." This means there is a mild level of risk regarding price deterioration. However, the fund does not have a "severe erosion-risk flag."

Pros

• The ETF has shown a positive three-year total return of 16.27%.

• It provides regular distributions that are usually paid out monthly.

Cons

• The one-year and year-to-date price returns have been negative.

• The fund shows a "mild" erosion-risk score, suggesting some price deterioration.

Beginner takeaway

When studying FSEC, remember that the share price and the total return are different numbers. The total return is often higher than the price return because it includes the cash distributions you receive. Also, keep an eye on the erosion-risk score to understand how much the share price has been moving downward over time.