ETF Education Report: PMBS

What this ETF is trying to do

The PIMCO Mortgage-Backed Securities Active Exchange-Traded Fund (PMBS) is an ETF traded on the NASDAQ. While specific holdings are not listed in this report, this type of fund generally focuses on mortgage-backed securities.

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 the cash distributions paid out to investors.

Based on the data provided:

• Year-to-Date (YTD): The price return is approximately -7.60%. However, the total return is approximately -4.33%.

• One-Year: The price return is approximately -7.33%. The total return for the year is approximately -2.85%.

To visualize the price change, we can look at an estimate. The current price is $45.92. The estimated price from roughly one year ago was approximately $49.55.

Income and distribution explanation

Some investors look for ETFs that pay out cash, known as distributions. This ETF has a distribution yield of approximately 5.05%. Over the last 12 months, it has made 12 distributions, which usually happen on a monthly basis.

It is important to remember that a high distribution yield does not mean you are earning that percentage as your total return. As shown in the numbers above, even with distributions, the total return has been negative over the last year.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. StockValueFinder uses an "erosion-risk score" to measure this risk.

PMBS has an erosion score of 75, which is labeled as "mild price erosion." While there is a decline in the share price, this is categorized as mild, and there is no "severe erosion-risk flag" present for this ETF.

Pros

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

• The erosion risk is currently labeled as "mild" rather than severe.

Cons

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

• The distribution yield alone does not make the total return positive.

Beginner takeaway

When looking at an ETF like PMBS, it is helpful to look at both the price and the total return. A fund might pay you cash through distributions, but if the share price falls by more than the amount of cash you receive, your total return will still be negative. Always check if the distributions are helping to offset a declining share price.