ETF Education Report: FIRST TRUST ULTRA SHORT DURATION MUNICIPAL ETF (FUMB)

What this ETF is trying to do

The FIRST TRUST ULTRA SHORT DURATION MUNICIPAL ETF (ticker: FUMB) is an exchange-traded fund. While the specific investment strategy details are not listed in the provided data, the name suggests it focuses on municipal bonds with very short durations.

What the numbers show

When looking at an ETF, it is important to understand the difference between "price return" and "total return."

• Price Return: This measures only the change in the share price.

• Total Return: This includes both the change in share price and any cash distributions (dividends) paid out.

For FUMB, the numbers show that the share price has seen some slight declines, but the total return has remained positive:

• Year-to-Date (YTD): The price return is approximately -0.70%, while the total return is approximately 1.33%.

• One Year: The price return is approximately -0.90%, while the total return is approximately 1.83%.

• Three Years: The price return is approximately -0.03%, while the total return is approximately 8.70%.

To visualize the price change, we can look at an estimated price from roughly one year ago, which was about $21.00. The current price is $19.92.

Income and distribution explanation

This ETF provides cash distributions to investors. The distribution yield is approximately 2.73%. This means the amount of cash paid out is about 2.73% relative to the current ETF price. These distributions usually happen monthly, with a trailing amount of $0.54 per share over the last year.

It is important to remember that a distribution yield is not the same as total return. While distributions provide cash income, they do not guarantee that your original investment will stay the same value.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in an ETF decreases over time. StockValueFinder uses an "erosion-risk score" to measure this risk.

FUMB has an erosion score of 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag present. This suggests the fund's value has remained relatively stable rather than showing significant deterioration.

Pros

• The fund shows a positive total return over the one-year, three-year, and five-year periods.

• It provides regular monthly cash distributions.

• The erosion-risk measurements suggest a stable profile.

Cons

• The share price (price return) has shown slight declines over the one-year and year-to-date periods.

Beginner takeaway

For new investors, FUMB shows how an ETF can have a slightly falling share price while still providing a positive total return through regular cash distributions. Always distinguish between the price of the share and the total return, which includes those extra cash payments.