ETF Education Report: ISHARES IBONDS OCT 2032 TERM TIPS ETF (IBII)

What this ETF is trying to do

This ETF, known by its ticker symbol IBII, is an exchange-traded fund. Based on its name, it focuses on "Term TIPS," which are specific types of 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 how much the share price has changed.

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

For IBII, the numbers show different trends depending on how long you look:

• Year-to-Date (YTD): The price return is approximately -4.70%. However, the total return is higher at approximately -1.51%.

• One Year: The price return was approximately -5.91%, while the total return was approximately -1.60%.

• Three Years: The price return was a small gain of about 0.22%. However, the total return was much higher at approximately 15.06%.

To give you an idea of the price change, the estimated price from roughly one year ago was $26.06. The current price is $24.52.

Income and distribution explanation

Some investors look for ETFs that pay out cash regularly. This is called the distribution yield. For IBII, the distribution yield is approximately 4.68%. This means the ETF has paid out about $1.15 in distributions over the last year. These payments usually happen quarterly, and most recently, they have been paid on Wednesdays.

It is important to remember that a high distribution yield does not mean you are making that much money in total. You must always look at the "total return" to see how the share price and the cash payments work 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 does not always mean the NAV is eroding, we use an erosion-risk score to measure this risk.

IBII has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk and is not a "severe erosion-risk flag."

Pros

• The three-year total return shows a positive gain of approximately 15.06%.

• The ETF provides regular cash distributions.

Cons

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

• There is a "mild" erosion-risk score of 75.

Beginner takeaway

When studying IBII, notice that the total return is usually better than the price return. This happens because the cash distributions help offset some of the losses in the share price. Always distinguish between the price of a single share and the total amount you might earn including distributions.