ETF Education Report: INVESCO NATIONAL AMT-FREE MUNICIPAL BOND ETF (PZA)

What this ETF is trying to do

The INVESCO NATIONAL AMT-FREE MUNICIPAL BOND ETF (ticker: PZA) is an exchange-traded fund. While the specific holdings are not listed in this report, this type of ETF generally focuses on municipal bonds. These are loans made to local governments.

What the numbers show

When looking at an ETF, it is important to understand the difference between "price return" and "total return."

• Price Return: This measures only the change in the share price.

• Total Return: This includes both the share price changes and the cash distributions (dividends) paid out to investors.

For PZA, the numbers show different trends depending on how much time has passed:

• Year-to-Date (YTD): The price return is approximately -7.55%, while the total return is approximately -4.87%.

• One Year: The price return is approximately -7.35%, while the total return is approximately -3.76%.

• Three Years: The price return is approximately -2.90%, while the total return is a positive 7.79%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The price was approximately $23.14, and the current price is $21.44.

Income and distribution explanation

Some investors look at ETFs for regular cash payments, known as distributions. PZA has a distribution yield of approximately 4.09%. This means the cash distributed is about 4.09% of the current share price. These distributions usually happen monthly, with 12 payments recorded over the last year.

It is important to remember that a high distribution yield does not mean you are making that much money in total. You must look at the total return to see how the share price and distributions worked together.

NAV erosion explanation

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

PZA has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk and does not necessarily mean the fund's value has collapsed. There is no severe erosion-risk flag for this ETF.

Pros

• The three-year total return is positive at approximately 7.79%.

• The ETF provides regular monthly distributions.

Cons

• The one-year and year-to-date price returns have been negative.

• The erosion-risk score indicates mild price erosion.

Beginner takeaway

When studying PZA, notice that the total return is higher than the price return in several periods. This happens because the cash distributions help offset some of the share-price declines. However, because the price return has been negative recently, investors should distinguish between the cash they receive and the actual change in the share price.