ETF Education Report: Franklin ShortTerm Municipal Income ETF (FTMS)

What this ETF is trying to do

The Franklin ShortTerm Municipal Income ETF (FTMS) is an exchange-traded fund listed on the NYSE. While the specific investment strategy details are not provided in this report, the name suggests it focuses on municipal income.

What the numbers show

When looking at ETF data, it is important to separate "price return" from "total return."

• Price Return: This measures only the change in the share price. For this ETF, the year-to-date (YTD) price return is approximately -2.11%. This means the share price has gone down since the start of the year.

• Total Return: This includes both the share price changes and any cash distributions paid out. The YTD total return for this ETF is approximately 0.35%.

Because the total return is higher than the price return, it shows that the cash distributions helped offset some of the decline in the share price.

Income and distribution explanation

Some investors look for ETFs that pay out regular cash, known as distributions.

• Distribution Yield: This ETF has a distribution yield of approximately 3.12%. This number describes the cash distributions relative to the current share price of $9.72.

• Frequency: This ETF usually pays out monthly. In the last 12 months, there were 11 payouts.

• Trailing Distributions: The amount paid out over the last year was approximately $0.30 per share.

It is important to remember that a high distribution yield does not guarantee an investor will earn that same percentage as a total return.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value (the actual value of the assets held by the fund). While a falling share price can sometimes be related to erosion, they are not the same thing. For this ETF, there is no severe erosion-risk flag present. The erosion score is currently withheld due to insufficient verified price history.

Pros

• The ETF provides regular cash distributions (usually monthly).

• The YTD total return is positive, even though the share price itself has declined.

Cons

• The YTD price return is negative, meaning the share price has dropped.

• Data for one-year and three-year returns was not supplied.

Beginner takeaway

When studying an ETF like FTMS, always look at both the price return and the total return. The price return tells you if the share price is going up or down, while the total return shows how much you would have earned if you included the cash distributions. High yields can provide income, but they do not protect against a falling share price.