What this ETF is trying to do

The Invesco DB US Dollar Index Bearish Fund -1x Shares (UDN) is an ETF that is designed to move in the opposite direction of the US Dollar Index. Because it is labeled as an "inverse" fund, when the value of the US Dollar goes up, this ETF generally tends to go down.

What the numbers show

The current price of UDN is $18.11. To understand how the price has changed, we can look at an estimated price from roughly one year ago, which was $18.88.

When looking at performance, it is important to separate "price return" from "total return." Price return only tracks the change in the share price. Total return includes both the price change and any cash distributions paid out.

• Year-to-Date (YTD): The YTD price return is approximately -0.71%. The YTD total return is also approximately -0.71%.

• One Year: The one-year price return was approximately -4.08%. However, the one-year total return was approximately -1.26%.

• Three Year: The three-year price return was approximately -2.21%. Interestingly, the three-year total return was approximately 11.60%.

Income and distribution explanation

This ETF provides a distribution yield of approximately 2.96%. This represents the cash distributions relative to the ETF's price. The trailing distributions were approximately $0.54.

It is important to remember that a distribution yield is not the same as total return. While distributions provide cash, they do not guarantee that your original investment will stay the same value. In this case, the distribution frequency is described as irregular or less frequent.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value, which is the actual value of the assets held by the fund. While a falling share price can sometimes be a sign of erosion, it is not proof of it.

For UDN, the erosion-risk score is 94, which carries an erosion label of "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag present.

Pros

• Total Return Potential: Over a three-year period, the total return was positive (approximately 11.60%), even though the share price itself saw a decline.

• Stable Erosion Score: The fund has a "good" erosion severity rating.

Cons

• Inverse Nature: Because this is an inverse fund, it is designed to lose value when the US Dollar strengthens.

• Price Declines: The one-year price return has been negative.

Beginner takeaway

When looking at UDN, it is helpful to distinguish between the share price and the total return. For some periods, the total return (which includes cash distributions) performed differently than the share price alone. Additionally, because this is an inverse fund, its performance is tied to the movement of the US Dollar in the opposite direction.