You apply expense ratio analysis to every index fund. Income ETFs require a different metric: coverage ratios. This guide applies the same evidence-based rigor to high-yield ETFs — with 3 years of data, a systematic ranking methodology, and the framework to evaluate any future fund.
A fund paying more in distributions than it earns is mathematically unsustainable. Coverage ratios quantify exactly how unsustainable. This is the correct metric for income ETF evaluation.
NAV change plus distributions equals total return. Evaluating an income ETF by yield alone is equivalent to evaluating an index fund by price appreciation without reinvested dividends.
The forensics methodology ranks funds by NAV stability, coverage ratio, and 3-year total return. The criteria are explicit and replicable — the same standard you'd apply to any quantitative analysis.
Chapters marked Most Relevant are specifically applicable to your situation.
Why NAV declines while distributions are paid, and when it's acceptable vs. destructive.
Coverage ratios, earnings vs. distributions, the compounding destruction formula.
How to tell the difference on your 1099-DIV and why it matters.
How to read coverage ratios and what thresholds trigger concern.
From most stable to most erosive: the definitive ranking with 3-year data.
One real ETF's journey from $25 NAV to $11 over 36 months.
At what coverage ratio and NAV decline rate does a fund become uninvestable.
How to generate 8%+ yield with provably stable NAV across market cycles.
Coverage Ratios > Expense Ratios
The Forensics methodology applies the same evidence standard Bogleheads apply to index funds — expense ratios matter, but coverage ratios matter more for income ETFs.
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