ETF Education Report: VTES

What this ETF is trying to do

The Vanguard Short-Term Tax-Exempt Bond ETF (VTES) is an exchange-traded fund. Based on its name, it focuses on short-term bonds that are tax-exempt. Investors often look at these types of funds to find ways to earn income through bond interest.

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 VTES, the numbers show:

• Year-to-Date (YTD): The price return is approximately -2.83%. However, the total return is higher at approximately -0.90%.

• One Year: The price return was approximately -2.91%, while the total return was approximately -0.30%.

• Three Years: The price return was a positive 0.41%, but the total return was much higher at approximately 9.21%.

To visualize the price change, we can look at an estimated price from roughly one year ago. The estimated price was $101.66, and the current price is $98.70.

Income and distribution explanation

This ETF provides cash distributions to investors. The distribution yield is approximately 2.72%. This means the amount of cash paid out is about 2.72% relative to the current ETF price. These payments usually happen monthly, with 12 payments recorded over the last year.

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

For VTES, the erosion score is 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 price movement is not currently showing signs of high erosion risk.

Pros

• The fund has a history of positive total returns over a three-year period.

• It provides regular monthly distributions.

• The erosion-risk measurement is rated as "good."

Cons

• The share price has seen a decline over the last year and year-to-date.

• The total return has been negative for both the one-year and year-to-date periods.

Beginner takeaway

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