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Why Ultra-High-Yield ETFs Can Be Dangerous

NOT RECOMMENDED: A very high distribution yield does not necessarily mean that an ETF is producing a high total return.

Some ultra-high-yield ETFs can distribute large amounts of cash while their NAV or share price declines. The income can look extremely attractive, but part of the investor's original capital value may be disappearing at the same time.

Consider a hypothetical example. An ETF could trade around $70 per share and pay very large distributions. If severe erosion later caused the shares to fall to only $10 per share, an investor could receive substantial cash distributions and still suffer a major overall loss of invested capital.

The $70-to-$10 example is for education only and is not a statement or prediction about any particular ETF. Investors should evaluate total return, NAV/share-price erosion, distribution sustainability, drawdowns, and split history rather than choosing an ETF based on yield alone.