FCTIX
Franklin CT Tax-Free Income-C
Tax-Exempt Income for Connecticut Residents
The Franklin CT Tax-Free Income-C (FCTIX) is specifically designed to provide investors with a high level of income that is exempt from both federal and Connecticut state income taxes. This makes it particularly attractive for residents of Connecticut who are looking to maximize their after-tax income. The fund achieves this by investing at least 80% of its total assets in municipal securities that pay interest free from personal income taxes. This focus on tax efficiency is a key feature that sets FCTIX apart from other investment options, making it a compelling choice for tax-sensitive investors seeking to preserve their wealth while enjoying a steady income stream.
At A Glance
Executive Summary
FCTIX offers tax-free income for CT residents with a 2.24% yield and 1.3% expense ratio, focusing on municipal bonds.
Tax-exempt income for CT residents Strong 1-year return of 8.41% High correlation with benchmark
Higher expense ratio at 1.3% Negative 3-year return Limited diversification
Performance Highlights and Recent Trends
FCTIX has demonstrated a strong performance over the past year, with a notable 1-year return of 8.41%, outperforming its benchmark, the BBG Muni USD Index, which returned 7.51% over the same period. This performance is particularly impressive given the fund’s focus on municipal bonds, which are generally considered to be lower-risk investments. However, it’s important to note that the fund’s longer-term performance has been more modest, with a 10-year annualized return of just 0.69% and a 3-year return of -1.66%. These figures suggest that while FCTIX can deliver strong short-term gains, investors should be mindful of its performance over longer time horizons.
Portfolio Composition and Top Holdings
The portfolio of FCTIX is heavily concentrated in municipal bonds, with 100% of its assets allocated to this sector. This focus on municipal securities is in line with the fund’s objective of providing tax-exempt income. The top holdings include various Connecticut state bonds, such as the Connecticut State Health & Educational Facilities Authority Revenue bonds, which make up a significant portion of the portfolio. This concentration in Connecticut-based securities underscores the fund’s commitment to providing tax-free income for residents of the state. Investors should be aware that this lack of diversification could pose risks if the Connecticut municipal bond market faces challenges.
Risk Metrics and Volatility Analysis
FCTIX exhibits a relatively high beta of 1.27, indicating that it is more volatile than its benchmark, the BBG Muni USD Index. Despite this, the fund has managed to maintain a positive alpha of 0.89%, suggesting that it has been able to generate returns above what would be expected given its risk level. The fund’s Sharpe ratio of 0.22 and Treynor ratio of 0.70 further highlight its ability to deliver risk-adjusted returns. However, investors should be cautious of the fund’s downside risk, as indicated by its maximum drawdown of -2.8%. This suggests that while FCTIX can offer attractive returns, it may also experience periods of significant volatility.
Comparative Analysis with Similar Funds
When compared to similar funds, FCTIX holds its ground with a competitive 1-year return of 8.41%. However, its expense ratio of 1.3% is higher than some of its peers, such as the Invesco Rochester NY Municipals-A (RMUNX) with an expense ratio of 0.0127. Additionally, FCTIX’s yield of 2.24% is lower than RMUNX’s 4.04%. Despite these differences, FCTIX’s focus on Connecticut tax-exempt income provides a unique advantage for residents of the state. Investors should weigh these factors when considering FCTIX against other municipal bond funds, particularly if they are seeking higher yields or lower expenses.
Expense Ratio and Cost Considerations
The expense ratio of FCTIX stands at 1.3%, which is relatively high compared to other municipal bond funds. This could be a point of concern for cost-conscious investors, as higher expenses can erode returns over time. However, the fund’s ability to provide tax-exempt income for Connecticut residents may justify the higher cost for those who prioritize tax efficiency. It’s important for investors to consider the trade-off between the fund’s expense ratio and its potential tax savings, as well as its overall performance, when evaluating its suitability for their investment portfolio.
Suitability for Tax-Sensitive Investors
FCTIX is particularly well-suited for investors who are sensitive to taxes and reside in Connecticut. The fund’s focus on providing income that is exempt from both federal and state taxes makes it an attractive option for those looking to maximize their after-tax returns. Additionally, the fund’s strong 1-year performance and high correlation with its benchmark suggest that it can be a reliable source of income in the short term. However, investors should be mindful of the fund’s higher expense ratio and its more modest long-term performance when considering it as a long-term investment option.
Conclusion: A Strategic Choice for Connecticut Residents
In conclusion, the Franklin CT Tax-Free Income-C (FCTIX) stands out as a strategic investment choice for Connecticut residents seeking tax-exempt income. Its focus on municipal bonds from the state of Connecticut provides a unique advantage for those looking to minimize their tax liabilities. While the fund’s higher expense ratio and limited diversification may be drawbacks, its strong recent performance and tax benefits make it a compelling option for tax-sensitive investors. Ultimately, FCTIX is best suited for those who prioritize tax efficiency and are comfortable with the fund’s risk profile and cost structure.
Similar Securities
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.
SHRCX: Western Asset CA Municipals-A | Tax-Exempt Income for CA Investors
SHRCX offers tax-exempt income for CA investors with a 0.75% expense ratio and 2.97% yield, focusing on capital preservation.
GTFBX: TRPrice GA Tax-Free Bond-Inv | Tax-Exempt Income from Georgia Bonds
GTFBX offers tax-free income with a 3.25% yield, focusing on Georgia municipal bonds. It has a competitive expense ratio of 0.56% and strong risk metrics.
FRORX: Franklin OR Tax-Free Income-A1 | Tax-Exempt Income for Oregon Residents
FRORX offers tax-exempt income for Oregon residents with a 3.17% yield and a competitive 0.67% expense ratio, focusing on municipal bonds.
FKLAX: Franklin LA Tax-Free Income-A1 | Tax-Exempt Income for Louisiana Investors
FKLAX offers tax-free income for Louisiana residents with a 2.90% yield and a competitive 0.75% expense ratio, focusing on municipal bonds.
Futher Reading
https://finance.yahoo.com/quote/FCTIX/”>Yahoo: Franklin CT Tax-Free Income-C
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