ETF Education Report: IBIH

What this ETF is trying to do

The ISHARES IBONDS OCT 2031 TERM TIPS ETF (IBIH) is an exchange-traded fund. While the specific holdings are not listed in this report, "TIPS" usually refers to Treasury Inflation-Protected Securities, which are government bonds designed to help protect against inflation.

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 share price changes and any cash distributions (dividends) paid out.

For IBIH, the numbers show different trends depending on the time frame:

• Year-to-Date (YTD): The price return is approximately -4.00%, while the total return is approximately -0.91%.

• One Year: The price return is approximately -5.06%, while the total return is approximately -0.85%.

• Three Years: The price return is approximately 1.88%, while the total return is much higher at approximately 15.75%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The estimated price was $26.31, and the current price is $24.98.

Income and distribution explanation

Some investors look for ETFs that pay out cash regularly. This is called the distribution yield. For IBIH, the distribution yield is approximately 4.50%. This means the ETF has paid out about $1.12 in trailing distributions. These payments usually happen quarterly, and the most recent data shows 4 payouts over the last year.

It is important to remember that a high distribution yield does not mean you are making that much money in total. You must look at the total return to see how the share price and the distributions worked together.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. While a falling share price is not the same thing as NAV erosion, we use an erosion-risk score to measure this risk.

IBIH has an erosion score of 75, which is labeled as "Mild price erosion." This is considered a mild risk level, and there is no severe erosion-risk flag for this ETF.

Pros

• The three-year total return is positive at approximately 15.75%.

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

Cons

• The one-year and year-to-date price returns have been negative.

• The total return has also been negative over the last year.

Beginner takeaway

When studying IBIH, notice that the total return is higher than the price return in several categories. This happens because the cash distributions help offset some of the share-price decline. However, because the price has been falling recently, investors should distinguish between the cash they receive and the overall value of their investment.