Understanding the iShares 0-3 Month Treasury Bond ETF (SGOV)

What this ETF is trying to do

The iShares 0-3 Month Treasury Bond ETF, known by its ticker symbol SGOV, is an exchange-traded fund. It focuses on very short-term U.S. Treasury bonds that mature in three months or less.

What the numbers show

When looking at an ETF, it is important to understand two different types of returns: price return and total return.

• Price Return: This measures only the change in the share price. For SGOV, the one-year price return was approximately 2.99%. The year-to-date (YTD) price return was approximately 6.97%.

• Total Return: This is a more complete measure because it includes both the price changes and the cash distributions paid out to investors. For SGOV, the one-year total return was approximately 3.74%, and the YTD total return was approximately 2.77%. Over three years, the total return was approximately 14.18%.

To give you an idea of price movement, the current price is $100.45. The estimated price from roughly one year ago was approximately $100.42.

Income and distribution explanation

Some investors look for ETFs that pay out cash, which is called a "distribution." SGOV has a distribution yield of approximately 3.65%. This means the cash paid out is about 3.65% of the ETF's price. These distributions usually happen monthly, and in the last 12 months, there were 12 payouts.

It is important to remember that a high distribution yield is not the same thing as total return. Total return tells you how much the investment grew overall, including those cash payments.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in an ETF decreases over time. Investors often care about this because they want to make sure the money they put in stays stable.

SGOV has an erosion-risk score of 94, which is labeled as "Stable / sideways." The erosion severity is described as "good," and there is no severe erosion-risk flag for this ETF.

Pros

• The ETF provides regular monthly distributions.

• It has a high income rating grade of "A."

• The erosion-risk score suggests the price has been relatively stable.

Cons

• The data provided does not list any specific top holdings for this ETF.

Beginner takeaway

When studying SGOV, remember the difference between price movement and total return. While the share price itself might change slightly, the total return accounts for the extra cash paid out through monthly distributions. Always look at the total return to see the full picture of how an investment has performed.