FTAZX
Franklin AZ Tax-Free Income-A1
Tax-Exempt Income for Arizona Residents
The Franklin AZ Tax-Free Income-A1 (FTAZX) is specifically designed to provide Arizona residents with a high level of income that is exempt from both federal and state income taxes. This makes it an attractive option for investors seeking to maximize their after-tax income, particularly those in higher tax brackets. The fund achieves this by investing at least 80% of its assets in municipal securities that are free from federal and Arizona state taxes. This focus on tax efficiency is a key feature that sets FTAZX apart from other investment options, making it particularly appealing for residents of Arizona who are looking to reduce their tax liabilities while still earning a steady income.
At A Glance
Executive Summary
FTAZX offers Arizona residents tax-exempt income with a 3.19% yield and a competitive 0.67% expense ratio, focusing on municipal bonds.
Tax-exempt income for Arizona residents Competitive yield of 3.19% Strong correlation with benchmark
Limited to Arizona municipal bonds Potentially lower returns compared to peers Higher beta indicating more volatility
Performance Metrics and Risk Analysis
FTAZX has demonstrated a solid performance with a one-year return of 9.15%, outperforming its benchmark, the BBG Muni USD Index, which returned 7.51% over the same period. The fund’s alpha of 1.63% indicates that it has added value beyond the benchmark’s performance. However, with a beta of 1.12, the fund is slightly more volatile than the market, suggesting that investors should be prepared for some fluctuations in value. The Sharpe ratio of 0.45 and Treynor ratio of 1.46 further highlight the fund’s ability to generate returns relative to its risk, although the standard deviation of 1.05% suggests moderate volatility. Overall, FTAZX offers a compelling risk-reward profile for investors seeking tax-exempt income.
Portfolio Composition and Top Holdings
The fund’s portfolio is exclusively composed of municipal bonds, with a 100% allocation to this asset class. This focus on municipal securities is designed to maximize tax-exempt income for investors. The top holdings include significant investments in Arizona-based projects, such as the Maricopa County Industrial Development Authority Revenue bonds and the Phoenix Civic Improvement Corporation Airport Revenue bonds. These holdings reflect the fund’s strategy of investing in high-quality municipal bonds that offer attractive yields while maintaining a low risk of default. The concentration in Arizona municipal bonds also aligns with the fund’s objective of providing tax-exempt income to Arizona residents.
Comparative Analysis with Similar Funds
When compared to similar funds, FTAZX offers a competitive yield of 3.19%, which is slightly lower than some peers like the JHancock High-Yield Municipal Bond-A (JHTFX) with a yield of 4.29%. However, FTAZX’s expense ratio of 0.67% is in line with industry standards, providing a cost-effective option for investors. The fund’s one-year return of 9.15% is commendable, though it trails behind some high-yield options like TRPrice Tax-Free High Yield-Inv (PRFHX) with a 13.62% return. Despite this, FTAZX’s focus on tax-exempt income and its strong correlation with the benchmark make it a reliable choice for risk-averse investors seeking stable returns.
Expense Ratio and Cost Efficiency
FTAZX maintains a competitive expense ratio of 0.67%, which is crucial for investors looking to maximize their net returns. This cost efficiency is particularly important in the municipal bond category, where lower expenses can significantly enhance the overall yield. The fund’s expense ratio compares favorably with similar funds, ensuring that investors retain more of their income. By keeping costs low, FTAZX allows investors to benefit from its tax-exempt income strategy without the burden of high fees, making it an attractive option for cost-conscious investors.
Risk Management and Drawdown Analysis
The fund’s risk management strategy is evident in its handling of drawdowns. With a maximum drawdown of -2.1%, FTAZX has shown resilience in maintaining value during market downturns. The fund’s ability to recover quickly from drawdowns, as indicated by its short drawdown length, underscores its stability and effective risk management practices. This resilience is further supported by the fund’s high correlation with its benchmark, ensuring that it moves in tandem with broader market trends. For investors concerned about potential losses, FTAZX’s risk management approach provides a level of assurance that their investments are well-protected.
Yield and Income Potential
FTAZX offers a yield of 3.19%, providing a steady stream of income for investors. This yield is particularly attractive for those in higher tax brackets, as the income is exempt from both federal and Arizona state taxes. The fund’s focus on high-quality municipal bonds ensures that the yield is not only competitive but also sustainable over the long term. For income-focused investors, FTAZX presents an opportunity to earn tax-efficient returns while benefiting from the stability of municipal bonds. The fund’s yield, combined with its tax-exempt status, makes it a compelling choice for those seeking reliable income.
Conclusion: A Strategic Choice for Arizona Investors
In conclusion, the Franklin AZ Tax-Free Income-A1 (FTAZX) stands out as a strategic investment choice for Arizona residents seeking tax-exempt income. Its focus on municipal bonds provides a stable and reliable income stream, while its competitive expense ratio ensures cost efficiency. The fund’s strong performance metrics, coupled with its effective risk management strategies, make it a suitable option for risk-averse investors. While it may not offer the highest returns compared to some high-yield peers, its tax-exempt status and focus on Arizona-based projects make it uniquely appealing for local investors. Overall, FTAZX is a well-rounded fund that aligns with the needs of those looking to maximize their after-tax income.
Similar Securities
FCTIX: Franklin CT Tax-Free Income-C | Tax-Exempt Income for Connecticut Investors
FCTIX offers tax-free income for CT residents with a 2.24% yield and 1.3% expense ratio, focusing on municipal bonds.
FTTMX: Franklin MI Tax-Free Income-A1 | Tax-Exempt Income for Michigan Investors
FTTMX offers Michigan residents tax-free income with a competitive 3.14% yield and a low 0.68% expense ratio, focusing on municipal bonds.
FTGAX: Franklin GA Tax-Free Income-A1 | Tax-Exempt Income for Georgia Residents
FTGAX offers tax-free income for Georgia residents with a competitive 2.86% yield and a focus on municipal bonds.
PRINX: TRPrice Summit Municipal Income-Inv | Tax-Exempt Income Fund
PRINX offers a 3.23% yield with a low 0.5% expense ratio, focusing on investment-grade municipal bonds for tax-exempt income.
OPTAX: Invesco AMT-Free Municipal-A | Tax-Exempt Income Investment
OPTAX offers a 3.77% yield with tax-exempt income, outperforming its benchmark with a 9.05% 1-year return.
Futher Reading
https://finance.yahoo.com/quote/FTAZX/”>Yahoo: Franklin AZ Tax-Free Income-A1
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