ETF Education Report: VANECK DIGITAL NATIVE ECONOMY ETF (GENZ)

What this ETF is trying to do

The VANECK DIGITAL NATIVE ECONOMY ETF (ticker: GENZ) is an exchange-traded fund that focuses on companies involved in the digital economy. Based on its top holdings, it includes businesses like Shopify, Roblox, NetEase, Uber, and Take-Two Interactive. These are companies that operate heavily in digital spaces.

What the numbers show

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

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

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

For GENZ, the numbers show a decline in value over several timeframes:

• Year-to-Date (YTD): The price return and total return are both approximately -8.32%.

• One Year: The price return was approximately -17.79%, while the total return was approximately -15.06%.

• Three Year: The price return was approximately -11.85%, while the total return was approximately -4.70%.

• Five Year: The five-year total return was approximately -17.31%.

To give you an idea of the price change, the estimated price from roughly one year ago was $45.58. The current price is $37.47.

Income and distribution explanation

Some investors look for ETFs that pay them cash, known as distributions. This ETF has a distribution yield of approximately 3.64%. However, it is important to remember that a high yield does not guarantee you will make money. Distributions are cash payments, but they are separate from the actual growth of your investment. In this case, the distributions were irregular and less frequent, with only one payout recorded in the last 12 months.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of an ETF's underlying assets decreases. While a falling share price does not always mean the NAV is shrinking, StockValueFinder uses an "erosion-risk score" to measure this risk.

GENZ has an erosion score of 55, which is labeled as "Moderate price erosion." This means there has been a moderate level of price deterioration. It is important to note that the "severe erosion-risk flag" is not active for this ETF.

Pros

• The ETF provides exposure to a variety of companies in the digital economy, such as DoorDash, Airbnb, and Reddit.

• It offers a distribution yield of approximately 3.64%.

Cons

• The ETF has experienced negative price returns and total returns over the one-year, three-year, and five-year periods.

• The erosion-risk score indicates moderate price erosion.

Beginner takeaway

When looking at GENZ, it is important to distinguish between the cash it pays out (distribution yield) and its overall performance (total return). While the ETF provides regular cash distributions, the share price has declined over the past year. Always remember that high yields can exist even when the share price is falling.