FMAHX
Franklin MA Tax-Free Income-Adv
Tax-Free Income for Massachusetts Residents
The Franklin MA Tax-Free Income-Adv (FMAHX) is specifically designed to provide a high level of income exempt from both federal and Massachusetts state personal income taxes. This makes it an attractive option for Massachusetts residents seeking to maximize their after-tax income. The fund achieves this by investing at least 80% of its total assets in municipal securities whose interest is free from federal income taxes, including the federal alternative minimum tax. This focus on tax efficiency is a key feature that distinguishes FMAHX from other municipal bond funds, making it particularly appealing to tax-sensitive investors in Massachusetts.
At A Glance
Executive Summary
FMAHX offers tax-free income for Massachusetts residents with a competitive 0.64% expense ratio and strong correlation to its benchmark.
Tax-free income for MA residents Strong correlation with benchmark Competitive expense ratio
Limited to Massachusetts bonds Lower yield compared to peers Negative three-year return
Performance in the Municipal Bond Sector
FMAHX has demonstrated a solid performance within the municipal bond sector, with a one-year return of 7.91%, outperforming its benchmark, the BBG Muni USD Index, which returned 7.51% over the same period. However, the fund’s three-year annualized return is -1.20%, indicating some volatility in recent years. Despite this, the fund’s inception return stands at 3.03%, showcasing its long-term potential. The fund’s performance is closely tied to its high correlation with the benchmark, at 99.44%, which suggests that it moves in tandem with the broader municipal bond market. This high correlation can be advantageous for investors looking for predictable performance relative to the municipal bond sector.
Risk Metrics and Stability
FMAHX exhibits a relatively stable risk profile, with a standard deviation of 1.04% and a beta of 1.11, indicating that it is slightly more volatile than the market. The fund’s alpha of 0.39% suggests that it has been able to generate returns above the expected market return, given its risk level. The Sharpe Ratio of 0.11 and Treynor Ratio of 0.35 further highlight the fund’s ability to provide risk-adjusted returns. The fund’s downside risk, measured by the Ulcer Index, is 0.86, which is relatively low, indicating limited potential for significant losses. These metrics suggest that FMAHX is a stable investment option for those seeking exposure to municipal bonds with a moderate risk profile.
Portfolio Composition and Top Holdings
The portfolio of FMAHX is heavily concentrated in municipal bonds, with 99.31% of its assets allocated to this sector. This focus on municipal securities is consistent with the fund’s objective of providing tax-free income. The top holdings include Massachusetts State Special Obligation Dedicated Tax Revenue bonds and Massachusetts State Health & Educational Facilities Authority bonds, which together make up a significant portion of the portfolio. This concentration in Massachusetts-issued bonds aligns with the fund’s strategy to provide state tax-exempt income to Massachusetts residents. The fund’s asset allocation strategy is designed to maximize tax efficiency while maintaining a diversified exposure to high-quality municipal bonds.
Competitive Expense Ratio and Yield
FMAHX offers a competitive expense ratio of 0.64%, which is relatively low compared to other funds in the municipal bond category. This low expense ratio is a significant advantage for investors, as it allows more of the fund’s returns to be passed on to shareholders. The fund’s yield of 2.98% is attractive for those seeking regular income, although it is lower than some of its peers, such as the DWS Strategic High Yield Tax-Free-S, which offers a yield of 7.88%. Despite this, the tax-free nature of the income generated by FMAHX can result in a higher effective yield for Massachusetts residents, making it a compelling choice for those prioritizing tax efficiency over raw yield.
Comparison with Similar Funds
When compared to similar funds, FMAHX stands out for its focus on Massachusetts municipal bonds and its tax-free income benefits. While funds like the Allspring High Yield Municipal Bond-Inst and Colorado BondShares A Tax-Exempt offer higher yields, they do not provide the same level of state tax exemption for Massachusetts residents. Additionally, FMAHX’s expense ratio is competitive, though slightly higher than some peers. The fund’s strong correlation with its benchmark and its focus on high-quality municipal bonds make it a reliable choice for investors seeking stability and tax efficiency. However, investors looking for higher yields may consider alternatives like the DWS Strategic High Yield Tax-Free-S.
Suitability for Tax-Sensitive Investors
FMAHX is particularly suitable for tax-sensitive investors residing in Massachusetts who are looking to maximize their after-tax income. The fund’s strategy of investing primarily in Massachusetts municipal bonds ensures that the income generated is exempt from both federal and state taxes, providing a significant tax advantage. This makes FMAHX an ideal choice for high-net-worth individuals and those in higher tax brackets who are seeking to reduce their tax liabilities. Additionally, the fund’s stable risk profile and competitive expense ratio further enhance its appeal to conservative investors who prioritize tax efficiency and capital preservation over high returns.
Conclusion: A Strategic Choice for Massachusetts Investors
In conclusion, the Franklin MA Tax-Free Income-Adv (FMAHX) offers a unique investment opportunity for Massachusetts residents seeking tax-free income. Its focus on high-quality municipal bonds and its competitive expense ratio make it a standout option in the municipal bond category. While its yield may be lower than some high-yield alternatives, the tax advantages it offers can result in a higher effective yield for Massachusetts investors. FMAHX is best suited for tax-sensitive investors who value stability and tax efficiency, making it a strategic addition to a diversified investment portfolio. Investors should consider their individual tax situations and investment goals when evaluating the suitability of FMAHX for their portfolios.
Similar Securities
MAMTX: BlackRock Strategic Muni Opportn-Inst | Tax-Exempt Income Opportunity
MAMTX offers a 3.53% yield with a focus on investment-grade municipal bonds, providing tax-exempt income and a competitive expense ratio of 0.67%.
LTEBX: American Funds Limited Term TaxEx Bd-A | Tax-Exempt Income & Capital Preservation
LTEBX offers tax-exempt income with a focus on capital preservation, featuring a 0.6% expense ratio and 2.26% yield, ideal for conservative investors.
OLCAX: Invesco CA Limited-Term Municipal-A | Tax-Exempt Income Investment
OLCAX offers tax-exempt income with a focus on California municipal bonds, featuring a 2.92% yield and a 0.93% expense ratio.
NJTFX: TRPrice NJ Tax-Free Bond-Inv | Tax-Free Income for NJ Residents
NJTFX offers tax-free income with a 3.12% yield and a low expense ratio of 0.57%, focusing on NJ municipal bonds for tax efficiency.
NYAAX: American Funds Tax-Exempt Fund of NY-A | Tax-Free Income for NY Residents
NYAAX offers tax-free income for NY residents with a 2.95% yield and a competitive 0.6% expense ratio, focusing on municipal bonds.
Futher Reading
https://finance.yahoo.com/quote/FMAHX/”>Yahoo: Franklin MA Tax-Free Income-Adv
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