FKTFX
Franklin CA Tax-Free Income-A1
Tax-Exempt Income for California Residents
The Franklin CA Tax-Free Income-A1 (FKTFX) is designed to provide investors with a high level of current income that is exempt from both federal and California state personal income taxes. This makes it particularly attractive for California residents who are in higher tax brackets and looking to maximize their after-tax income. The fund’s focus on municipal bonds ensures that investors can benefit from tax-exempt income while also seeking preservation of capital. With a yield of 3.58%, FKTFX offers a competitive income stream compared to other municipal bond funds, making it a compelling choice for those prioritizing tax efficiency.
At A Glance
Executive Summary
FKTFX offers tax-free income with a 3.58% yield and a 0.61% expense ratio, ideal for California residents seeking municipal bond exposure.
Tax-exempt income for California residents Strong correlation with benchmark Competitive yield of 3.58%
Higher expense ratio compared to peers Limited diversification outside California Potential interest rate sensitivity
Performance Amidst Market Volatility
FKTFX has demonstrated resilience amidst market volatility, as evidenced by its recent performance metrics. Over the past year, the fund has achieved a return of 9.06%, outperforming its benchmark, the BBG Muni USD Index, which returned 7.51% over the same period. This performance is indicative of the fund’s ability to navigate challenging market conditions while maintaining a focus on capital preservation. The fund’s alpha of 1.54% further highlights its ability to generate excess returns relative to its benchmark, making it a strong contender for investors seeking stability and growth in the municipal bond space.
Portfolio Composition and Top Holdings
The portfolio of FKTFX is heavily concentrated in municipal bonds, with a staggering 99.76% allocation to this sector. This focus aligns with the fund’s objective of providing tax-free income through municipal bond investments. The top holdings include significant allocations to California Health Facilities Financing Authority Revenue bonds and San Joaquin Hills California Transportation Corridor Agency Toll Road Revenue bonds, which together form a substantial portion of the portfolio. This concentration in California-based municipal bonds underscores the fund’s commitment to offering tax-exempt income specifically tailored for California residents.
Risk Metrics and Drawdown Analysis
FKTFX exhibits a robust risk profile, with a beta of 1.18 indicating moderate sensitivity to market movements. The fund’s standard deviation of 1.12% suggests relatively low volatility, which is appealing for risk-averse investors. Additionally, the fund’s maximum drawdown of -2.6% over a short period highlights its resilience in adverse market conditions. The Treynor Ratio of 1.30 and Sharpe Ratio of 0.40 further demonstrate the fund’s ability to deliver risk-adjusted returns, making it a prudent choice for investors seeking a balance between risk and reward in their municipal bond investments.
Comparative Analysis with Similar Funds
When compared to similar funds, FKTFX holds its ground with a competitive yield and performance metrics. For instance, while the Colorado BondShares A Tax-Exempt (HICOX) offers a higher yield of 5.01%, FKTFX’s yield of 3.58% is still attractive given its tax-exempt status. Additionally, FKTFX’s expense ratio of 0.61% is higher than some peers, but its strong correlation with the benchmark and consistent performance may justify the cost for investors prioritizing tax efficiency. This comparative analysis highlights FKTFX’s position as a viable option for those seeking tax-exempt income in California.
Expense Ratio and Cost Considerations
The expense ratio of FKTFX stands at 0.61%, which is relatively higher compared to some of its peers in the municipal bond category. However, this cost is offset by the fund’s strong performance and tax-exempt income benefits. Investors should weigh the expense ratio against the fund’s ability to deliver consistent returns and its focus on California municipal bonds, which may offer unique tax advantages. For investors prioritizing tax efficiency and willing to accept a slightly higher cost, FKTFX remains a compelling option in the municipal bond space.
Suitability for Income-Focused Investors
FKTFX is particularly suitable for income-focused investors residing in California who are seeking to maximize their after-tax income. The fund’s emphasis on providing tax-exempt income through municipal bonds makes it an ideal choice for those in higher tax brackets. Additionally, the fund’s strong correlation with its benchmark and competitive yield further enhance its appeal to investors looking for a stable income stream. While the fund’s higher expense ratio may be a consideration, its tax benefits and performance metrics make it a worthwhile investment for those prioritizing tax efficiency and income stability.
Conclusion: A Strategic Choice for California Investors
In conclusion, the Franklin CA Tax-Free Income-A1 (FKTFX) stands out as a strategic choice for California investors seeking tax-exempt income. With its focus on municipal bonds and a competitive yield of 3.58%, the fund offers a compelling option for those looking to maximize their after-tax income. While the expense ratio is higher than some peers, the fund’s strong performance and tax benefits justify the cost for many investors. Overall, FKTFX is well-suited for income-focused investors in California who prioritize tax efficiency and stability in their investment portfolios.
Similar Securities
TAFTX: American Funds Tax-Exempt Fund of CA-A | Tax-Free Income Investment
TAFTX offers tax-free income with a 2.88% yield, focusing on California municipal bonds. It has a competitive expense ratio of 0.57%.
FRMOX: Franklin MO Tax-Free Income-A1 | Tax-Exempt Income for Missouri Investors
FRMOX offers Missouri residents tax-exempt income with a competitive 3.42% yield and a 0.68% expense ratio, focusing 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.
FALZX: Franklin AL Tax-Free Income-Adv | Tax-Free Income for Alabama Residents
FALZX offers Alabama residents tax-free income with a 2.79% yield and a competitive 0.65% expense ratio, focusing on municipal bonds.
FXNCX: Franklin NC Tax-Free Income-A1 | Tax-Free Income for NC Residents
FXNCX offers tax-free income for NC residents with a competitive 2.78% yield and a 0.70% expense ratio, focusing on municipal bonds.
Futher Reading
https://finance.yahoo.com/quote/FKTFX/”>Yahoo: Franklin CA Tax-Free Income-A1
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