FMINX
Franklin MN Tax-Free Income-A1
Tax-Exempt Income for Minnesota Residents
The Franklin MN Tax-Free Income-A1 (FMINX) is a municipal bond fund designed to provide investors with income that is exempt from federal and Minnesota state income taxes. This makes it particularly attractive for residents of Minnesota who are looking to maximize their after-tax income. The fund’s primary objective is to offer a high level of tax-exempt income while preserving capital, making it a suitable choice for investors seeking tax efficiency in their portfolios. With a yield of 3.09%, FMINX offers a competitive income stream compared to other municipal bond funds, especially for those in higher tax brackets who can benefit most from its tax-exempt status.
At A Glance
Executive Summary
FMINX offers tax-exempt income for Minnesota residents with a 3.09% yield and a competitive 0.69% expense ratio.
Tax-exempt income for Minnesota residents Competitive yield of 3.09% Managed by Franklin Templeton Investments
Limited to Minnesota municipal bonds Higher beta of 1.29 Negative three-year return
Performance in the Municipal Bond Sector
FMINX has demonstrated a solid performance within the municipal bond sector, with a one-year return of 8.57%, outperforming its benchmark, the BBG Muni USD Index, which returned 7.51% over the same period. This performance highlights the fund’s ability to navigate the municipal bond market effectively, providing investors with a reliable income stream. However, it’s important to note that the fund’s three-year return is -1.28%, indicating some volatility in recent years. Despite this, the fund’s long-term performance since inception remains strong at 4.49%, showcasing its potential for consistent returns over time.
Risk and Volatility Considerations
Investors should be aware of the risk metrics associated with FMINX. The fund has a beta of 1.29, indicating higher volatility compared to its benchmark. This suggests that while the fund may offer higher returns, it also comes with increased risk. The fund’s standard deviation of 1.21% and a Sharpe ratio of 0.25 further illustrate its risk-return profile. Additionally, the fund experienced a maximum drawdown of -2.9%, which investors should consider when evaluating their risk tolerance. Despite these risks, the fund’s alpha of 1.05% suggests that it has the potential to generate excess returns relative to its benchmark.
Portfolio Composition and Top Holdings
FMINX is exclusively invested in municipal bonds, with a 100% allocation to this asset class. This focus on municipal bonds aligns with the fund’s objective of providing tax-exempt income. The fund’s top holdings include bonds from various Minnesota-based issuers, such as the Alexandria Minn Indpt Sch Dist No 206 and the Minneapolis & St Paul Minn Met Arpts Commn Arpt Rev. These holdings reflect the fund’s strategy of investing in high-quality municipal bonds that offer attractive yields. The concentration in Minnesota municipal bonds also underscores the fund’s commitment to providing tax benefits to Minnesota residents.
Competitive Expense Ratio and Yield
FMINX offers a competitive expense ratio of 0.69%, which is relatively low compared to other funds in the municipal bond category. This low expense ratio allows investors to retain more of their returns, enhancing the fund’s overall appeal. Additionally, the fund’s yield of 3.09% is attractive for investors seeking a steady income stream. When compared to similar funds, such as TRPrice Tax-Free High Yield-Inv and Dupree NC Tax-Free Income, FMINX’s yield remains competitive, making it a viable option for income-focused investors. The combination of a low expense ratio and a solid yield positions FMINX as a cost-effective choice for those seeking tax-exempt income.
Comparison with Similar Funds
When comparing FMINX to similar funds, such as TRPrice Tax-Free High Yield-Inv and JHancock High-Yield Municipal Bond-A, it’s clear that FMINX offers a unique value proposition. While these funds may offer higher yields, FMINX’s focus on Minnesota municipal bonds provides specific tax advantages for Minnesota residents. Additionally, FMINX’s expense ratio of 0.69% is competitive, ensuring that investors can maximize their returns. Although some similar funds have outperformed FMINX in terms of one-year returns, the tax benefits and lower expense ratio make FMINX an attractive option for those prioritizing tax efficiency and cost-effectiveness.
Suitability for Income-Focused Investors
FMINX is particularly well-suited for income-focused investors residing in Minnesota who are looking to benefit from tax-exempt income. The fund’s strategy of investing in high-quality municipal bonds ensures a steady income stream, while its tax-exempt status enhances after-tax returns. Investors in higher tax brackets will find FMINX especially beneficial, as the tax savings can significantly boost their net income. Additionally, the fund’s competitive yield and low expense ratio make it an appealing choice for those seeking a cost-effective investment option. However, investors should consider their risk tolerance, given the fund’s higher beta and recent volatility.
Conclusion: A Strategic Choice for Minnesota Residents
In conclusion, the Franklin MN Tax-Free Income-A1 (FMINX) stands out as a strategic investment choice for Minnesota residents seeking tax-exempt income. Its focus on municipal bonds from Minnesota issuers provides specific tax advantages, making it an ideal option for those looking to maximize their after-tax income. The fund’s competitive yield, low expense ratio, and strong long-term performance further enhance its appeal. While there are risks associated with its higher beta and recent volatility, the potential for tax savings and steady income make FMINX a compelling choice for income-focused investors in Minnesota. As always, investors should carefully consider their individual financial goals and risk tolerance before investing.
Similar Securities
PXMAX: Putnam MA Tax-Exempt Income-A | Tax-Free Income for MA Residents
PXMAX offers tax-free income with a 2.81% yield, focusing on Massachusetts municipal bonds, suitable for conservative investors.
SMBMX: Invesco SMA Municipal Bond | Tax-Exempt Income Investment
SMBMX offers a 4.17% yield with zero expense ratio, focusing on municipal bonds for tax-exempt income, outperforming its benchmark with an 8.07% 1-year return.
PTHAX: Putnam Tax-Free High Yield-A | High Yield Muni Bonds
PTHAX offers a 3.68% yield with a focus on lower-rated municipal bonds, providing tax-free income with a competitive expense ratio of 0.96%.
FKTIX: Franklin Federal Tax-Free Income-A1 | Tax-Free Municipal Bond Investment
FKTIX offers a 3.60% tax-free yield with a low expense ratio of 0.64%, focusing on municipal bonds for capital preservation.
FKCIX: Franklin CA Interm-Term Tax-Free Inc-A1 | Tax-Free Income from CA Municipal Bonds
FKCIX offers tax-free income with a 3.09% yield, focusing on CA municipal bonds. Its 0.59% expense ratio is competitive in the muni category.
Futher Reading
https://finance.yahoo.com/quote/FMINX/”>Yahoo: Franklin MN Tax-Free Income-A1
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