What this ETF is trying to do

The Vanguard Mortgage-Backed Securities Index Fund ETF Shares (ticker: VMBS) is an exchange-traded fund. Based on its name, it focuses on mortgage-backed securities.

What the numbers show

As of October 5, 2026, the current price of one share is $44.16. An estimated price from roughly one year ago was $46.97.

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

• Price return only shows how much the share price itself has changed.

• Total return shows the change in price plus any cash payments (distributions) you received.

Here is what the data shows for VMBS:

• Year-to-Date (YTD): The price return is -6.20%, while the total return is -3.18%.

• One Year: The price return is -5.98%, while the total return is -1.93%.

• Three Year: The price return is 2.10%, while the total return is 15.43%.

• Five Year: The total return is -1.48%.

To see how the share price alone has changed, imagine you had $10,000 invested at the estimated price from one year ago ($46.97). Based only on the current price of $44.16, that investment would be worth approximately $9,402 today.

Income and distribution explanation

Some investors look for ETFs that pay out cash regularly. This is called a distribution yield. For VMBS, the distribution yield is 4.45%. Over the last year, the fund made 12 payments, which means it usually pays out monthly. The trailing distributions were approximately $1.97 per share.

It is important to remember that a high distribution yield does not mean you are guaranteed to make that much money in total return. A fund can pay out cash even if its share price is falling.

NAV erosion explanation

"NAV erosion" is a term used when the value of the underlying assets or the share price of a fund declines over time. This ETF has an erosion-risk score of 75, which is labeled as "mild price erosion." This means there has been some decline in the share price. However, this ETF does not have a severe erosion-risk flag.

Pros

• Monthly Income: The fund typically provides regular cash distributions (usually monthly).

• Longer-term Total Return: Over a three-year period, the total return was 15.43%.

Cons

• Recent Price Declines: Both the year-to-date and one-year price returns have been negative.

• Five-Year Performance: The five-year total return is currently negative at -1.48%.

• Mild Erosion: The fund shows signs of mild price erosion.

Beginner takeaway

When looking at an ETF like VMBS, don't just look at the cash it pays out (the distribution yield). Always check the total return to see if the share price is dropping faster than the cash payments are coming in. In this case, while the fund provides monthly income, the recent share-price declines have resulted in negative total returns for the past year.