ETF Education Report: SIMPLIFY US EQUITY PLUS UPSIDE CONVEXITY ETF (SPUC)

What this ETF is trying to do

The SIMPLIFY US EQUITY PLUS UPSIDE CONVEXITY ETF (SPUC) is an exchange-traded fund listed on the NYSE. Based on its top holdings, this ETF focuses heavily on US equities. Its largest holding is the iShares Core S&P 500 ETF, which makes up approximately 99.63% of the fund.

What the numbers show

When looking at an ETF, 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 distributions paid out to investors.

• Year-to-Date (YTD): The YTD price return is approximately 5.61%. However, the YTD total return is higher at approximately 11.45%.

• One Year: The one-year price return was approximately -0.93%. When including distributions, the one-year total return was approximately 12.11%.

• Three Year: The three-year price return was approximately 61.68%, while the three-year total return was approximately 86.99%.

• Five Year: The five-year total return was approximately 81.01%.

To give a visual example of the price movement, the current price is $49.21. The estimated price from roughly one year ago was approximately $49.67.

Income and distribution explanation

This ETF has a distribution yield of approximately 12.27%. This means the fund paid out a significant amount of cash relative to its price. Over the last 12 months, the trailing distributions were $6.04. These payments happened 8 times over the last year, usually on a quarterly basis.

It is important to remember that a high distribution yield does not mean an investor earned that exact percentage as their total return. You must look at the "total return" figure to see the full picture of how the investment performed including those cash payments.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value (the actual value of the assets held by the fund). While falling share prices can sometimes be a sign of erosion, they are not the same thing.

For this ETF, the erosion-risk score is 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag present.

Pros

• The fund has shown strong total returns over the three-year and five-year periods.

• It provides a high distribution yield for those looking for cash income.

Cons

• The one-year price return was slightly negative, meaning the share price itself decreased over that period.

Beginner takeaway

When evaluating SPUC, notice the gap between the price return and the total return. Because the total return is higher than the price return, it shows that the cash distributions played a large role in the fund's overall performance. Always remember that high yields can be misleading if the share price is also changing.