ETF Education Report: Simplify Gamma Emerging Market Bond ETF (GAEM)

What this ETF is trying to do

The Simplify Gamma Emerging Market Bond ETF (GAEM) is an exchange-traded fund that focuses on emerging market bonds. An ETF is a basket of investments that trades on an exchange like a regular stock.

What the numbers show

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

• Price Return: This only tracks how much the share price itself has gone up or down.

• Total Return: This tracks the share price change plus any cash distributions (dividends) paid out to investors.

For GAEM, the numbers show:

• Year-to-Date (YTD): The price return is approximately -2.30%, meaning the share price has dropped slightly this year. However, the YTD total return is approximately 2.47%, which includes the impact of distributions.

• One Year: The one-year price return is approximately -1.50%. The one-year total return is approximately 5.38%.

• Price Comparison: The current price is $26.01. An estimated price from roughly one year ago was $26.41.

Income and distribution explanation

This ETF provides cash distributions to investors. The distribution yield is approximately 8.46%. This number describes the cash paid out relative to the ETF's price.

Distributions for this fund usually happen monthly, with a total of 12 payouts in the last year. Most of these payments have occurred on Tuesdays. It is important to remember that a high distribution yield does not mean the investor earned that exact percentage as their total return.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in the ETF decreases. Investors often care about this because they want to keep their original investment amount (the principal) stable while collecting income.

StockValueFinder uses an "erosion-risk score" to measure this risk. GAEM 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 for this ETF.

Pros

• The fund provides a relatively high distribution yield of approximately 8.46%.

• The total return (which includes distributions) has been positive over the last year.

Cons

• The share price itself (the price return) has seen a decline over the year-to-date and one-year periods.

• Total return data for the three-year period was not supplied.

Beginner takeaway

When looking at an ETF like GAEM, it is helpful to look at both the price return and the total return. While the share price has gone down slightly, the total return is positive because of the cash distributions paid to investors. Always remember that high yields can be misleading if the share price is falling significantly, so checking the erosion-risk score can help you understand how stable the fund's value appears to be.