What this ETF is trying to do

The Nuveen Preferred and Income Fund (JPT) is an ETF. Based on its name, it focuses on providing income through preferred stocks.

What the numbers show

The current price of one share is $15.87. We can estimate that the price was about $17.89 roughly one year ago.

It is important to understand the difference between "price return" and "total return." Price return only looks at how much the share price changed. Total return includes those price changes plus any cash distributions paid out to investors.

Here is what the data shows:

• One-Year: The price return was -11.29%, but the total return was -4.04%.

• Year-to-Date (YTD): The price return was -10.29%, while the total return was -4.23%.

• Three-Year: The price return was -31.24%, and the total return was -14.75%.

To see how share prices affect your money, imagine you invested $10,000 exactly one year ago. If you only look at the share-price decline (the price return) before adding any distributions, your $10,000 would have dropped to approximately $8,871.

Income and distribution explanation

This ETF has a distribution yield of 8.35%. This number describes the cash payments made relative to the ETF's price. These payments happen frequently; in the last year, there were 13 distributions, and they usually happen every month.

However, a high distribution yield can be misleading. A high yield does not mean you earned that percentage as your total return. You must look at the total return to see how much money was actually made or lost after including those cash payments.

NAV erosion explanation

This ETF has a "severe erosion-risk flag." It also has an erosion-risk score of 30, which is labeled as "significant price erosion."

"NAV erosion" refers to a decline in the value of the underlying assets in the fund. While we cannot prove the NAV itself declined from this data, the market price of the shares has fallen significantly. When an ETF's share price drops from a high price to a much lower price, it can destroy your principal. Principal is the original amount of money you invested.

Income investors usually prefer ETFs where the price stays steady or goes up slightly. If the share price collapses, even large cash payments might not be enough to stop you from losing money overall.

Pros

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

• It has a distribution yield of 8.35%.

Cons

• There has been a significant share-price decline over the last three years.

• The fund has a severe erosion-risk flag.

• Total returns have been negative for the last year, year-to-date, and over the last three years.

Beginner takeaway

When looking at ETFs that pay high income, do not look at the yield alone. Always check the price return. If the share price is falling quickly, it can eat away at your original investment, even if you are receiving regular cash payments.