Understanding the Virtus Global Multi-Sector Income Fund (VGI)

What this ETF is trying to do

The Virtus Global Multi-Sector Income Fund (VGI) is an exchange-traded fund (ETF) listed on the NYSE. While the specific investment strategy isn't detailed in the data, the name suggests it focuses on providing income from different sectors around the world.

What the numbers show

When looking at an ETF, it is important to separate "price return" from "total return."

• Price Return: This measures only how much the share price has changed. For VGI, the year-to-date (YTD) price return is approximately -13.39%. The one-year price return is approximately -14.70%.

• Total Return: This includes both the price changes and the money paid out to investors (distributions). Because VGI pays out regular income, its total return is different from its price return. For example, the one-year total return is approximately -3.23%, which is higher than the price return of -14.70%. Over three years, the total return was approximately 32.75%, even though the price return for that same period was -8.86%.

To visualize the price change, an investor could look at the estimated price from roughly one year ago, which was $7.96. The current price is $6.79.

Income and distribution explanation

VGI has a high distribution yield of approximately 14.14%. This means the fund pays out a large amount of cash relative to its share price. These distributions happen frequently; in the last 12 months, there were 12 payouts, usually occurring on a monthly basis. Most of these payments have been made on Mondays.

It is important to remember that a high distribution yield does not mean an investor earned that full percentage as a total return.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in a fund decreases over time. StockValueFinder uses an "erosion-risk score" to measure this risk. VGI has an erosion score of 75, which is labeled as "mild price erosion." While the share price has declined, this score is a measurement of risk rather than a guarantee that the fund's value is disappearing.

Pros

• The fund provides a high distribution yield of approximately 14.14%.

• It offers regular monthly income.

• The three-year total return is positive at approximately 32.75%.

Cons

• The share price has seen a decline, with a one-year price return of approximately -14.70%.

• The fund shows a "mild" erosion-risk score.

Beginner takeaway

When looking at funds like VGI, high yields can be eye-catching, but they don't tell the whole story. An investor should look at both the price return (how much the share price moves) and the total return (which includes the cash paid out). A fund can pay out a lot of cash even if its share price is falling.