Understanding the Vanguard Short-Term Treasury Index Fund ETF (VGSH)

What this ETF is trying to do

The Vanguard Short-Term Treasury Index Fund ETF (VGSH) is an exchange-traded fund. Based on its name, it focuses on short-term U.S. Treasury securities.

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 measures 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 VGSH, the numbers show different results depending on which you look at:

• Year-to-Date (YTD): The price return is approximately -2.16%, but the total return is +0.59%.

• One Year: The price return is approximately -2.15%, while the total return is +1.58%.

• Three Years: The price return is approximately -0.09%, but the total return is +12.58%.

To visualize the price change, we can look at an estimated price from roughly one year ago, which was $58.72. The current price is $57.46. This shows a slight decline in the share price over that time.

Income and distribution explanation

This ETF provides regular cash payments, known as distributions. The distribution yield is approximately 3.79%. These payments usually happen monthly, with the most common day for a payout being Monday. Over the last 12 months, there were 12 payouts.

It is important to remember that a high distribution yield is not the same thing as total return. While distributions provide cash income, they do not guarantee that your original investment will stay the same value.

NAV erosion explanation

"NAV erosion" is a term used to describe when the value of the underlying assets in an ETF decreases over time. StockValueFinder uses an "erosion-risk score" to measure this risk.

VGSH has an erosion score of 94, which is labeled as "Stable / sideways." The erosion severity is rated as "good," and there is no severe erosion-risk flag present. This suggests the fund's value has remained relatively stable according to these risk measurements.

Pros

• The fund provides regular monthly income.

• The total return figures are positive over the one-year and three-year periods, even though the share price itself has seen some declines.

• The erosion-risk score suggests stability.

Cons

• The share price (price return) has shown some decline over the last year and year-to-date.

Beginner takeaway

For new investors, the main lesson here is to look at both price return and total return. While the share price of VGSH has gone down slightly, the total return (which includes the cash paid out to you) has been positive over the last year and three years. Always remember that receiving cash distributions is different from seeing your share price grow.