FMDZX
Franklin MD Tax-Free Income-Adv
Tax-Free Income for Maryland Residents
The Franklin MD Tax-Free Income-Adv (FMDZX) is specifically designed to provide a high level of income exempt from both federal and Maryland state personal income taxes. This makes it an attractive option for Maryland 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 these taxes. This focus on tax efficiency is a key selling point for investors in high tax brackets who are looking to preserve more of their income. With a yield of 3.39%, FMDZX offers a compelling option for those prioritizing tax-free income.
At A Glance
Executive Summary
FMDZX offers Maryland residents tax-free income with a 3.39% yield and a competitive 0.65% expense ratio, focusing on municipal bonds.
Tax-free income for Maryland residents; Competitive expense ratio; Strong correlation with benchmark.
Limited sector diversification; Lower yield compared to peers; Negative three-year return.
Performance in the Municipal Bond Sector
FMDZX has demonstrated a solid performance within the municipal bond sector, particularly over the past year with an 8.49% return, outperforming its benchmark, the BBG Muni USD Index, which returned 7.51%. This performance is indicative of the fund’s effective management and strategic allocation within the municipal bond market. However, it’s important to note that the fund’s three-year annualized return is -0.61%, suggesting some volatility in its performance over the medium term. Investors should consider this variability when evaluating the fund’s potential for consistent returns.
Risk Metrics and Volatility
The fund’s risk metrics reveal a nuanced picture of its volatility and risk-adjusted performance. With a beta of 1.16, FMDZX is slightly more volatile than the market, which is typical for a fund focused on municipal bonds. The fund’s alpha of 0.97% indicates a positive performance relative to its benchmark, suggesting effective management. The Sharpe ratio of 0.26 and Treynor ratio of 0.84 further highlight the fund’s risk-adjusted returns, though they suggest moderate risk levels. The standard deviation of 1.09% and a max drawdown of -2.6% indicate that while the fund has experienced some volatility, it has managed to recover quickly, as evidenced by its short drawdown length.
Portfolio Composition and Top Holdings
FMDZX’s portfolio is heavily concentrated in Maryland municipal bonds, with top holdings including the Maryland State Stadium Authority Revenue and the Maryland State Health & Higher Educational Facilities Authority Revenue bonds. This focus on local municipal bonds aligns with the fund’s objective of providing tax-free income to Maryland residents. The fund’s top holdings, such as the Maryland State Stadium Authority Revenue bond at 4.25% and the Maryland State Health & Higher Educational Facilities Authority Revenue bond at 3.35%, reflect a strategic allocation towards high-quality municipal securities. This concentration in Maryland-specific bonds provides a unique advantage for local investors seeking tax-exempt income.
Expense Ratio and Cost Efficiency
With an expense ratio of 0.65%, FMDZX is competitively priced within the municipal bond fund category. This cost efficiency is a significant advantage for investors, as lower expenses can lead to higher net returns over time. Compared to similar funds, FMDZX offers a reasonable expense structure, making it an attractive option for cost-conscious investors. The fund’s management by Franklin Templeton Investments, a reputable firm known for its expertise in fixed income, further enhances its appeal by ensuring that investors receive value for their investment.
Comparative Analysis with Similar Funds
When compared to similar funds such as Allspring High Yield Municipal Bond-Inst (WHYIX) and DWS Strategic High Yield Tax-Free-S (SHYTX), FMDZX offers a lower yield but benefits from a more focused investment strategy on Maryland municipal bonds. While WHYIX and SHYTX offer higher yields of 4.70% and 7.88% respectively, they also come with higher betas, indicating greater volatility. FMDZX’s strategy of investing in Maryland-specific bonds provides a unique tax advantage for residents, which may outweigh the higher yields offered by its peers for those prioritizing tax efficiency over absolute returns.
Suitability for Risk-Averse Investors
FMDZX is particularly suitable for risk-averse investors who prioritize tax-free income and are residents of Maryland. The fund’s focus on municipal bonds, which are generally considered lower risk compared to corporate bonds, aligns well with the needs of conservative investors. Its strong correlation with the benchmark (98.74%) and a high R-squared value (97.49%) indicate that the fund closely tracks the performance of the municipal bond market, providing a level of predictability and stability. This makes FMDZX an ideal choice for investors seeking a steady income stream with minimal tax liabilities.
Conclusion: A Strategic Choice for Maryland Investors
In conclusion, the Franklin MD Tax-Free Income-Adv (FMDZX) stands out as a strategic investment choice for Maryland residents seeking tax-free income. Its focus on Maryland municipal bonds offers a unique advantage in terms of tax efficiency, making it particularly appealing for those in higher tax brackets. While the fund’s yield is lower compared to some peers, its competitive expense ratio and strong performance relative to its benchmark make it a compelling option for conservative investors. Overall, FMDZX is well-suited for those looking to balance risk and return while maximizing after-tax income.
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SHMMX: Western Asset Managed Municipals-A | Tax-Exempt Income Fund
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FMDZX: Franklin MD Tax-Free Income-Adv | Tax-Free Income for Maryland Investors
FMDZX offers Maryland residents tax-free income with a 3.39% yield and a competitive 0.65% expense ratio, focusing on municipal bonds.
Futher Reading
https://finance.yahoo.com/quote/FMDZX/”>Yahoo: Franklin MD Tax-Free Income-Adv
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