What this ETF is trying to do

The Invesco High Income 2023 Target Term Fund (ticker: IHIT) is an ETF designed to provide high income to its investors.

What the numbers show

As of November 27, 2023, the current price of one share is $6.92. An estimated price from roughly one year ago was about $8.35.

It is important to understand two different types of returns:

• Price Return: This measures only the change in the share price. The one-year price return for this ETF was -17.13%.

• Total Return: This measures the overall return, including the cash distributions paid to investors. The one-year total return was -12.97%.

To see how a share-price decline affects an investment, imagine you invested $10,000 roughly one year ago. Based on the one-year price return of -17.13%, your $10,000 would have dropped to approximately $8,287.43 before adding any cash distributions back in.

Other data shows a year-to-date (YTD) price return of -13.93% and a YTD total return of -10.00%. Over three years, the price return was -16.32%, while the total return was -1.28%.

Income and distribution explanation

This ETF has a distribution yield of 5.42%. This number describes the cash distributions relative to the ETF's price. The fund usually pays out money monthly, and it made 12 payments over the last year. Each trailing distribution was $0.375 per share.

A high distribution yield can sometimes be misleading. A high yield does not mean an investor earned that percentage as their total return. It is possible to receive regular cash payments even while the share price is falling.

NAV erosion explanation

The fund has an erosion-risk score of 55, which is described as "moderate price erosion."

"NAV" stands for Net Asset Value, which is the value of the assets held by the fund. NAV erosion refers to a decline in that underlying value. When an ETF's share price drops significantly over time, it can be a sign of this erosion.

Pros

• The fund provides regular income through monthly distributions.

• The total return was higher than the price return, which means the cash distributions helped offset some of the share-price decline.

Cons

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

• There is a moderate level of price erosion.

Beginner takeaway

When looking at ETFs that pay income, it is easy to focus only on the distribution yield. However, if the share price drops a lot, the loss in the value of your investment might be larger than the cash you receive. Many income investors prefer ETFs where the share price stays steady or goes up slightly, because this helps protect their original investment.