ETF Education Report: Morgan Stanley Emerging Markets Debt Fund Inc (MSD)

What this ETF is trying to do

The Morgan Stanley Emerging Markets Debt Fund Inc (MSD) is an ETF that focuses on debt from emerging markets. This means the fund invests in bonds or other types of debt issued by countries that are still developing their economies.

What the numbers show

It is important to understand the difference between "price return" and "total return." Price return only tracks how much the share price changes. Total return includes both the price change and any cash payments (distributions) made to investors.

Based on the data:

• Year-to-Date (YTD): The price return is approximately -5.28%. However, the total return is -1.40%.

• One Year: The price return was approximately -7.16%, while the total return was 0.89%.

• Three Years: The price return was approximately 5.11%, but the total return was much higher at 44.15%.

To visualize the price change, if you had invested in this ETF at its estimated price from roughly one year ago ($7.54), the current price is $7.00.

Income and distribution explanation

This ETF provides cash distributions to investors. The distribution yield is approximately 8.71%. This number tells you how much cash was paid out relative to the current share price. The fund usually pays these distributions quarterly, and it has made 4 payments in the last 12 months.

Note that a high distribution yield does not mean you earned that much in total return. You must look at the "total return" figure to see how the investment performed overall including those payments.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value, which is the actual value of the assets held by the fund. While a falling share price can sometimes look like erosion, they are not always the same thing.

For this ETF, the erosion-risk score is 75, which is labeled as "mild price erosion." There is no severe erosion-risk flag for this fund.

Pros

• The fund has a history of positive total returns over the last one, three, and five years.

• It offers a relatively high distribution yield of approximately 8.71%.

Cons

• The share price has seen declines in both the year-to-date and one-year periods.

• The fund shows a "mild" erosion-risk score.

Beginner takeaway

When looking at an ETF like MSD, it is helpful to look at both the share price and the total return. A falling share price can be offset by cash distributions, which is why the total return might be higher than the price return. Always remember that a high yield alone can be misleading; it is important to see how the overall value of the investment is changing over time.