AMHIX
American High-Income Municipal Bond-A
Tax-Exempt Income Focus
The American High-Income Municipal Bond-A (AMHIX) fund is designed to provide investors with a high level of current income that is exempt from federal income tax. This makes it particularly attractive for high-income investors looking to minimize their tax liabilities while still achieving a substantial yield. The fund primarily invests in municipal bonds, ensuring that at least 80% of its assets are in securities exempt from regular federal income tax. This focus on tax-exempt income is a key differentiator for AMHIX, making it a compelling choice for those in higher tax brackets seeking to optimize their after-tax returns.
At A Glance
Executive Summary
AMHIX offers a 3.84% yield with a focus on tax-exempt income, outperforming its benchmark with a 13.83% 1-year return and a competitive 0.66% expense ratio.
High yield of 3.84% exempt from federal tax. Strong 1-year return of 13.83%. Competitive expense ratio of 0.66%.
High beta of 1.20 indicates volatility. Limited sector diversification. Potential risks with municipal bonds.
Impressive Recent Performance
AMHIX has demonstrated impressive performance over the past year, with a 1-year return of 13.83%, significantly outperforming its benchmark, the BBG Muni USD Index, which returned 7.51% over the same period. This strong performance can be attributed to the fund’s strategic allocation in high-yield municipal bonds, which have benefited from favorable market conditions. The fund’s ability to deliver such returns while maintaining a focus on tax-exempt income highlights its effectiveness in navigating the municipal bond market, making it a standout option for investors seeking both income and growth.
Risk and Volatility Considerations
Investors should be aware of the risk and volatility associated with AMHIX. The fund has a beta of 1.20, indicating that it is more volatile than the market. This higher volatility is typical for funds in the muni junk bond category, which often invest in lower-rated municipal bonds that offer higher yields but come with increased risk. Despite this, AMHIX has managed to maintain a relatively low standard deviation of 1.17%, suggesting that while it is more volatile, the fund’s returns have been consistent. The fund’s alpha of 6.31% further indicates its ability to generate returns above the expected market performance, compensating for the higher risk.
Competitive Expense Ratio
AMHIX offers a competitive expense ratio of 0.66%, which is relatively low for a fund in the muni junk bond category. This low expense ratio is a significant advantage for investors, as it means more of the fund’s returns are passed on to shareholders rather than being consumed by management fees. When compared to similar funds, such as the JHancock High-Yield Municipal Bond-A (JHTFX) with an expense ratio of 0.74%, AMHIX stands out as a cost-effective option. This cost efficiency, combined with its strong performance, makes AMHIX an attractive choice for cost-conscious investors seeking high-yield municipal bond exposure.
Portfolio Composition and Holdings
The portfolio of AMHIX is heavily weighted towards municipal bonds, with 97.84% of its assets allocated to this sector. This concentration reflects the fund’s commitment to providing tax-exempt income. The top holdings include various Puerto Rico Commonwealth bonds and other municipal securities, which are known for their high yields. The fund also maintains a small cash position of 2.16%, providing liquidity and flexibility to respond to market changes. This focused allocation strategy allows AMHIX to capitalize on opportunities within the municipal bond market, while also managing risk through diversification across different issuers and regions.
Comparison with Similar Funds
When compared to similar funds, AMHIX holds its ground with a strong 1-year return of 13.83% and a yield of 3.84%. For instance, the TRPrice Tax-Free High Yield-Inv (PRFHX) offers a slightly lower 1-year return of 13.62% and a yield of 3.67%, while the JHancock High-Yield Municipal Bond-A (JHTFX) provides a higher 1-year return of 16.31% but with a higher expense ratio of 0.74%. These comparisons highlight AMHIX’s competitive positioning in terms of both performance and cost. Investors looking for a balance of high yield and reasonable expenses may find AMHIX to be a suitable choice among its peers.
Suitability for Income-Focused Investors
AMHIX is particularly well-suited for income-focused investors who are in higher tax brackets and looking to maximize their after-tax income. The fund’s emphasis on municipal bonds ensures that the income generated is largely exempt from federal taxes, providing a tax-efficient income stream. Additionally, the fund’s strong performance and competitive expense ratio make it an attractive option for those seeking both income and growth. However, potential investors should consider the fund’s higher volatility and the inherent risks associated with municipal bonds, particularly those in the high-yield category, before making an investment decision.
Conclusion: A Strategic Choice for Tax-Exempt Income
In conclusion, the American High-Income Municipal Bond-A (AMHIX) fund stands out as a strategic choice for investors seeking tax-exempt income with a competitive yield of 3.84%. Its strong recent performance, coupled with a low expense ratio, makes it an appealing option for high-income investors looking to enhance their portfolios with municipal bond exposure. While the fund does carry higher volatility, its ability to outperform its benchmark and deliver consistent returns underscores its potential as a valuable addition to an income-focused investment strategy. Investors should weigh the benefits of tax-exempt income against the risks associated with high-yield municipal bonds when considering AMHIX for their portfolios.
Similar Securities
FRHIX: Franklin High-Yield Tax-Free Income-A1 | High-Yield Tax-Free Municipal Bonds
FRHIX offers a high tax-free yield with a 4.47% return, focusing on lower-rated municipal bonds. It stands out with a 14.30% 1-year return and a 0.68% expense ratio.
ORNAX: Invesco Rochester Municipal Opportunity-A | High-Yield Tax-Exempt Income
ORNAX offers high-yield, tax-exempt income with a 5.16% yield, focusing on below investment grade municipal bonds, ideal for risk-tolerant investors.
STXAX: Western Asset Municipal High Income-A | Tax-Exempt High-Yield Muni Bonds
STXAX offers high-yield, tax-exempt income with a 3.84% yield and 0.81% expense ratio, ideal for risk-tolerant investors seeking municipal bond exposure.
PRFHX: TRPrice Tax-Free High Yield-Inv | High Tax-Free Income
PRFHX offers a 3.67% tax-free yield with a 0.67% expense ratio, outperforming its benchmark with a 13.63% 1-year return.
PRIHX: TRPrice Intermed Tax-Free High Yield-Inv | Tax-Exempt Income
PRIHX offers a 3.48% yield with a focus on noninvestment-grade municipal bonds, providing tax-exempt income with a competitive expense ratio of 0.46%.
Futher Reading
https://www.morningstar.com/funds/xnas/AMHIX/quote
https://finance.yahoo.com/quote/AMHIX/”>Yahoo: American High-Income Municipal Bond-A
https://ftcloud.fasttrack.net/web/chart/AMHIX
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