ETF Education Report: ISHARES IBONDS OCT 2035 TERM TIPS ETF (IBIL)

What this ETF is trying to do

This ETF, known by its ticker symbol IBIL, 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 two different types of returns: 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 IBIL, the numbers show a decline in both areas:

• Year-to-Date (YTD): The price return is approximately -6.46%. However, the YTD total return is -2.50%.

• One Year: The one-year price return is approximately -7.35%. The one-year total return is approximately -2.42%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The price was approximately $25.67, and the current price is $23.78. This shows a decline in the share price over that period.

Income and distribution explanation

Some investors look at ETFs for income. IBIL has a distribution yield of approximately 5.50%. This number describes the cash distributions relative to the ETF's price. Over the last 12 months, the trailing distributions were $1.31 per share. These payments happened 5 times in the last year, usually on a quarterly basis.

It is important to remember that a high distribution yield does not mean an investor earned that percentage as their total return. As seen in the data above, even with distributions, the total return was still negative for the year.

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 market price does not always mean the NAV has declined, we can look at "erosion-risk" measurements to see how the price is behaving.

IBIL 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 provides regular cash distributions (income).

• The distribution yield is 5.50%.

Cons

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

• Both the price return and total return have been negative for the year-to-date and one-year periods.

Beginner takeaway

When evaluating an ETF like IBIL, don't look at the distribution yield alone. While the fund pays out cash, the share price has also been falling. Always compare the price return to the total return to get a clearer picture of how the investment has performed overall.