ETF Education Report: PRINCIPAL U.S. MEGA-CAP ETF (USMC)

What this ETF is trying to do

The PRINCIPAL U.S. MEGA-CAP ETF (ticker: USMC) is an exchange-traded fund that focuses on very large American companies. Based on its top holdings, it invests in major names across different industries, such as technology, finance, and retail.

What the numbers show

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

• Price Return: This measures only the change in the share price.

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

According to the data:

• Year-to-Date (YTD): The price return is approximately 14.10%, while the total return is approximately 14.77%.

• One-Year: The price return is approximately 13.91%, while the total return is approximately 14.81%.

• Three-Year: The price return is approximately 80.75%, while the total return is approximately 86.14%.

To give you an idea of price movement, the estimated price from roughly one year ago was $68.57. The current price is $78.10.

Income and distribution explanation

This ETF pays out cash to investors, known as distributions. The distribution yield is currently 0.72%. This number describes the cash paid out relative to the ETF's price. The fund usually pays these out quarterly, and it has made 4 payments over the last 12 months. It is important to remember that a distribution yield tells you about cash income, but it is not the same thing as your total return.

NAV erosion explanation

"NAV erosion" refers to a situation where the value of the underlying assets in the fund decreases significantly over time. Some investors worry about this because they want their original investment (the principal) to stay stable. For USMC, the erosion-risk score is 100, and the label states "No price erosion detected." There is no severe erosion-risk flag for this ETF.

Top Holdings

The following are the top holdings in this portfolio (note that this is a partial list):

• NVIDIA CORP: 8.21%

• APPLE INC: 7.40%

• MICRON TECHNOLOGY INC: 6.36%

• MICROSOFT CORP: 5.47%

• ALPHABET INC CLASS A: 5.45%

• BROADCOM INC: 4.37%

• VISA INC CLASS A: 4.33%

• JPMORGAN CHASE & CO: 4.29%

• META PLATFORMS INC CLASS A: 4.23%

• MASTERCARD INC CLASS A: 4.21%

*Holdings can change over time.*

Pros

• The ETF has shown positive price returns and total returns over the one-year and three-year periods.

• The erosion-risk measurement is considered "good."

Cons

• The distribution yield (0.72%) is relatively low compared to some other types of income-focused funds.

Beginner takeaway

When studying an ETF like USMC, always look at both the price return and the total return to see the full picture of performance. While this fund provides some cash income through distributions, its primary growth has come from the increase in share prices.