Understanding the Vanguard Intermediate-Term Treasury Index Fund ETF (VGIT)

What this ETF is trying to do

The VGIT ETF is designed to track an index of intermediate-term U.S. Treasury securities. This means the fund focuses on government debt that typically matures in a medium-term timeframe.

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 VGIT, the numbers show different trends depending on how long you look:

• Year-to-Date (YTD): The price return is approximately -5.71%, while the total return is approximately -2.91%.

• One Year: The price return is approximately -5.75%, while the total return is approximately -2.03%.

• Three Years: The price return is approximately -0.55%, but the total return is much higher at approximately 11.22%.

To visualize the price change, the estimated price from roughly one year ago was $60.00. The current price is $56.51.

Income and distribution explanation

This ETF provides cash distributions to investors. The current distribution yield is approximately 4.05%. These payments happen frequently; the fund usually pays out monthly, with 12 payments recorded over the last year. Most of these payments have occurred on Mondays.

It is important to remember that a distribution yield tells you how much cash was paid out relative to the price, but it is not the same as your total return.

NAV erosion explanation

"NAV erosion" refers to a decline in the value of the fund's underlying assets. While a falling share price can look like erosion, they are not always the same thing.

StockValueFinder uses an "erosion-risk score" to measure this risk. VGIT has an erosion score of 75, which is labeled as "mild price erosion." This is considered a mild measurement and does not trigger a severe erosion-risk flag.

Pros

• The fund provides regular monthly income through distributions.

• Over a three-year period, the total return has been positive at approximately 11.22%.

Cons

• The share price has seen a decline over the last year.

• The year-to-date total return is currently negative.

Beginner takeaway

When studying VGIT, notice that the total return is higher than the price return. This happens because the cash distributions help offset some of the share-price declines. Always look at both the price movement and the total return to get a full picture of how an ETF is performing.