ETF Education Report: TCW Strategic Income Fund Inc (TSI)

What this ETF is trying to do

TCW Strategic Income Fund Inc (TSI) is an Exchange Traded Fund (ETF). While the specific investment strategy is not listed in the provided data, ETFs are tools used by investors to access a collection of different assets through a single ticker symbol on an exchange like the NYSE.

What the numbers show

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

• Price Return: This only measures how much the share price itself has changed. For TSI, the one-year price return was approximately -13.97%. The year-to-date (YTD) price return was approximately -12.75%.

• Total Return: This includes both the price changes and the money paid out to investors (distributions). Because this ETF pays out money, the total return is usually different from the price return. For example, while the one-year price return was -13.97%, the one-year total return was approximately -5.79%.

Based on an estimated price from roughly one year ago of $5.01, the current price is $4.31.

Income and distribution explanation

This ETF has a distribution yield of approximately 9.97%. This means the fund pays out a significant amount of cash relative to its price. These distributions happen frequently; in the last 12 months, there were 11 payouts, and they usually occur monthly. Most of these payments happen on Thursdays.

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

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases. While a falling share price is not the same thing as NAV erosion, we use "erosion-risk scores" to measure this possibility.

TSI has an erosion score of 75, which is labeled as "mild price erosion." This is a measurement of risk, not a guarantee that the fund's value has collapsed. There is no "severe erosion-risk flag" for this ETF.

Pros

• The fund provides regular cash distributions (usually monthly).

• The three-year total return is positive at approximately 17.76%, showing that when including distributions, the overall performance over three years was positive.

Cons

• The share price has seen declines in the short term (one-year and YTD).

• The one-year total return is negative, meaning the price decline was larger than the income received from distributions.

Beginner takeaway

When looking at ETFs like TSI, don't just look at the high distribution yield. Always compare the price return (the change in share price) with the total return (the change in price plus the cash paid out). This helps you see if the income being paid out is helping to offset a falling share price.