ETF Education Report: ALPS DYNAMIC CORE INCOME ETF (RFCI)

What this ETF is trying to do

The ALPS DYNAMIC CORE INCOME ETF (ticker: RFCI) is an exchange-traded fund listed on the NYSE. While the specific investment strategy is not detailed in the provided data, ETFs like this are generally designed to provide investors with regular income.

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 money paid out through distributions.

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

• Year-to-Date (YTD): The price return is approximately -5.31%. However, the total return is higher at approximately -2.06%.

• One Year: The price return was approximately -5.64%, while the total return was approximately -1.26%.

• Three Years: The price return was a slight gain of about 0.50%. However, the total return was much higher at approximately 14.79%.

To visualize the price change over the last year, we can look at the estimated prices. The price was approximately $22.77 one year ago, and the current price is $21.49.

Income and distribution explanation

This ETF provides cash distributions to investors. The distribution yield is approximately 4.74%. This number describes the cash paid out relative to the current ETF price. These payments usually happen monthly, with 12 payments recorded over the last year.

It is important to remember that a high distribution yield does not mean an investor earned that same percentage as their total return. Total return is the most accurate way to see how much value was actually gained or lost.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of an ETF's underlying assets declines. While a falling share price does not always mean the NAV is declining, we can look at "erosion-risk" scores to see how much price deterioration has occurred.

RFCI has an erosion score of 75, which is labeled as "mild price erosion." This is considered a mild level of risk and does not trigger a severe erosion-risk flag.

Pros

• The ETF has provided a strong three-year total return of approximately 14.79%.

• It offers a regular distribution yield of approximately 4.74%.

Cons

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

• There is a "mild" erosion-risk score, indicating some price deterioration.

Beginner takeaway

When looking at RFCI, notice that the total return is usually higher than the price return. This happens because the distributions help offset some of the share-price declines. However, investors should always look at total return to get the full picture of how an investment is performing.