Understanding the American Century Diversified Municipal Bond ETF (TAXF)

What this ETF is trying to do

The American Century Diversified Municipal Bond ETF (ticker: TAXF) is an exchange-traded fund that focuses on municipal bonds. Municipal bonds are typically loans made to local governments.

What the numbers show

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

• Price Return: This only tracks how much the share price itself has changed.

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

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

• Year-to-Date (YTD): The price return is approximately -5.08%, while the total return is approximately -2.62%.

• One Year: The price return is approximately -4.55%, while the total return is approximately -1.17%.

• Three Years: The price return is approximately 0.46%, while the total return is much higher at approximately 11.54%.

To visualize the price change, we can look at an estimated price from roughly one year ago, which was $50.10. The current price is $47.82.

Income and distribution explanation

This ETF provides cash distributions to investors. The distribution yield is approximately 3.67%. This number describes the cash paid out relative to the current ETF price. These payments happen frequently; in the last 12 months, there were 11 distributions, and they usually occur monthly.

It is important to remember that a distribution yield is not the same as total return. While distributions provide cash income, they do not guarantee that your original investment will stay the same value.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. Investors often care about this because they want their principal (the money they originally put in) to remain stable.

For TAXF, 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. This suggests the fund's price movement is not currently showing signs of high erosion risk according to StockValueFinder's measurements.

Pros

• Higher Total Returns over time: While short-term price returns have been negative, the three-year total return is positive at approximately 11.54%.

• Regular Income: The fund has a history of frequent distributions, usually occurring on Thursdays.

Cons

• Recent Price Declines: Both the year-to-date and one-year price returns have been negative.

• No Top Holdings Listed: There is no data available regarding the specific companies or bonds held within this fund.

Beginner takeaway

When looking at TAXF, notice how the total return is higher than the price return. This happens because the cash distributions help offset some of the share-price decline. Always look at both numbers to get a full picture of how an ETF is performing.