ETF Education Report: ISHARES LONG-TERM NATIONAL MUNI BOND ETF (LMUB)

What this ETF is trying to do

The ISHARES LONG-TERM NATIONAL MUNI BOND ETF (ticker: LMUB) is an exchange-traded fund. Based on its name, it focuses on long-term municipal bonds. Municipal bonds are loans made to local or state governments.

What the numbers show

When looking at an ETF, it is important to know 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.

For LMUB, the numbers show:

• Year-to-Date (YTD): The price return is approximately -5.38%. However, the YTD total return is approximately -3.02%.

• One-Year: The price return is approximately -4.83%. The one-year total return is approximately -1.14%.

To visualize the price change, we can look at an estimated example. The current price is $47.67. An estimated price from roughly one year ago was approximately $50.09. This shows a decline in the share price over that period.

Income and distribution explanation

Some investors look for ETFs that pay out regular cash. This is called the distribution yield.

LMUB has a distribution yield of approximately 4.02%. This means the ETF paid out about 4.02% of its price in cash over the last year. These payments happened 12 times in the last year, usually on a monthly basis. Most of these payments occurred on Mondays.

It is important to remember that a high distribution yield does not mean you have earned that much in total return. You must look at the total return to see how the investment performed overall, including the price changes.

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 can look like erosion, they are not the same thing.

StockValueFinder uses an erosion-risk score to measure this risk. LMUB has an erosion score of 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag for this ETF.

Pros

• The ETF provides regular monthly distributions.

• The erosion-risk score suggests the fund is currently stable or moving sideways rather than showing signs of severe risk.

Cons

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

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

Beginner takeaway

When studying LMUB, notice that even though the fund pays a 4.02% distribution yield, the total return has been negative. This happens because the drop in the share price was larger than the cash paid out to investors. Always look at both the price return and the total return to get the full picture.