ETF Education Report: Gabelli Financial Services Opportunities ETF (GABF)

What this ETF is trying to do

The Gabelli Financial Services Opportunities ETF (GABF) is an exchange-traded fund that focuses on the financial services sector. Based on its top holdings, it invests in various companies involved in banking, payments, and asset management. Because the list of holdings provided is partial, we can only see some of the companies it owns, such as Berkshire Hathaway Inc Class B and Capital One Financial Corp.

What the numbers show

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

• Price Return: This measures only the change in the share price. For GABF, the one-year price return was approximately -11.79%. The year-to-date (YTD) price return is approximately -5.44%.

• Total Return: This includes the change in share price plus any cash distributions (dividends) paid out. The one-year total return was approximately -10.08%. The YTD total return is also approximately -5.44%.

Over a longer period, the three-year numbers show growth. The three-year price return was approximately 44.85%, and the three-year total return was approximately 61.42%.

To give you an idea of the recent price change, the current price is $43.69. The estimated price from roughly one year ago was approximately $49.53.

Income and distribution explanation

Some investors look for ETFs that pay out cash, known as distributions. GABF has a distribution yield of approximately 2.08%. This means the cash distributed is about 2.08% of the ETF's price. The trailing distributions were approximately $0.91 per share.

It is important to remember that a distribution yield is not the same as total return. Also, distributions are paid out irregularly, with only one payout recorded in the last 12 months.

NAV erosion explanation

"NAV erosion" is a term used to describe a decline in the Net Asset Value (the actual value of the assets held by the fund). While a falling share price does not always mean the NAV is dropping, we use an "erosion-risk score" to measure this risk.

GABF has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk, not a guarantee that the fund's value has been destroyed. There is no "severe erosion-risk flag" for this ETF.

Pros

• The ETF has shown strong total returns over a three-year period.

• It provides regular, though irregular, cash distributions.

Cons

• The ETF has experienced a share-price decline over the last year.

• The distribution frequency is irregular rather than consistent.

Beginner takeaway

When looking at GABF, it is helpful to distinguish between the share price and the total return. While the share price has gone down over the last year, the three-year history shows significant growth. Always remember that a high distribution yield does not guarantee that your original investment will stay the same value.