ETF Education Report: AB Tax-Aware Short Duration Municipal ETF (TAFI)

What this ETF is trying to do

The AB Tax-Aware Short Duration Municipal ETF (ticker: TAFI) is an exchange-traded fund. While the specific investment strategy details are not listed in the provided data, municipal ETFs generally focus on bonds issued by 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 only tracks how much the share price changes.

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

For TAFI, the numbers show different results depending on which you look at:

• Year-to-Date (YTD): The price return is approximately -2.46%, but the total return is approximately -0.20%.

• One Year: The price return was approximately -2.61%, while the total return was positive at approximately 0.46%.

• Three Year: The price return was approximately 0.41%, but the total return was much higher at approximately 10.60%.

To give you an idea of the price movement, the estimated price from roughly one year ago was $25.25. The current price is $24.59.

Income and distribution explanation

This ETF provides cash distributions to investors. The distribution yield is approximately 3.18%. This means the amount of cash paid out is about 3.18% 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 distribution yield is not the same as total return. A high yield does not guarantee that an investor will make money, especially if the share price is falling.

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 a falling share price can sometimes look like erosion, they are not always the same thing.

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

Pros

• The ETF has a history of positive total returns over the one-year and three-year periods.

• It provides regular monthly cash distributions.

Cons

• The share price has seen some declines, as shown by the negative year-to-date and one-year price returns.

Beginner takeaway

When studying TAFI, notice how the total return is often higher than the price return. This happens because the cash distributions help offset some of the share-price declines. Always look at both price movement and total return to get a full picture of how an ETF is performing.