FRMOX
Franklin MO Tax-Free Income-A1
Tax-Exempt Income for Missouri Residents
Franklin MO Tax-Free Income-A1 (FRMOX) is a municipal bond fund designed to provide investors with a high level of income exempt from both federal and Missouri state personal income taxes. This makes it particularly attractive for Missouri residents seeking to maximize their after-tax income. The fund invests at least 80% of its total assets in securities whose interest is free from these taxes, ensuring that investors benefit from tax efficiency. With a yield of 3.42%, FRMOX offers a compelling option for those looking to enhance their income while minimizing tax liabilities. This focus on tax-exempt income is a key differentiator for the fund, making it a suitable choice for investors in higher tax brackets who reside in Missouri.
At A Glance
Executive Summary
FRMOX offers Missouri residents tax-exempt income with a competitive 3.42% yield and a 0.68% expense ratio, focusing on municipal bonds.
Tax-exempt income for Missouri residents Competitive yield of 3.42% Strong correlation with benchmark
Limited to Missouri municipal bonds Higher expense ratio than some peers Negative three-year return
Performance Amidst Market Fluctuations
FRMOX has demonstrated resilience amidst market fluctuations, as evidenced by its recent performance metrics. Over the past year, the fund has achieved a return of 9.24%, 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 market volatility effectively, providing investors with a stable income stream. However, it’s important to note that the fund’s three-year annualized return is -1.09%, suggesting some challenges in recent years. Despite this, the fund’s long-term performance since inception remains strong at 4.67%, highlighting its potential for consistent returns over time.
Portfolio Composition and Top Holdings
The portfolio of FRMOX is exclusively composed of municipal bonds, with a 100% allocation to this sector. This focus on municipal bonds aligns with the fund’s objective of providing tax-exempt income. The top holdings include significant investments in Missouri-based municipal projects, such as the Kansas City MO Industrial Development Authority Airport Special Obligation and the Missouri Joint Municipal Electric Utility Commission Power Project Revenue bonds. These holdings reflect the fund’s strategy of investing in high-quality municipal securities that offer attractive yields. The concentration in Missouri municipal bonds ensures that the fund remains aligned with its tax-exempt income objective, providing investors with a targeted approach to income generation.
Risk Metrics and Volatility Management
FRMOX exhibits a robust risk management profile, with a beta of 1.10, indicating a slightly higher sensitivity to market movements compared to its benchmark. The fund’s alpha of 1.73% suggests that it has outperformed the market on a risk-adjusted basis. Additionally, the Sharpe Ratio of 0.48 and Treynor Ratio of 1.57 highlight the fund’s ability to generate returns relative to its risk. The standard deviation of 1.05% indicates low volatility, which is appealing for risk-averse investors. The fund’s downside risk, measured by the Ulcer Index, is 0.77, reflecting its ability to manage potential losses effectively. These metrics underscore the fund’s commitment to delivering stable returns while managing risk prudently.
Comparative Analysis with Similar Funds
When compared to similar funds, FRMOX holds its ground with a competitive yield and a focus on tax-exempt income. For instance, the TRPrice Tax-Free High Yield-Inv (PRFHX) offers a higher one-year return of 13.62% but comes with a slightly lower yield of 3.67%. Meanwhile, the Dupree NC Tax-Free Income (NTFIX) provides a yield of 4.43% but is focused on a different geographic area. The JHancock High-Yield Municipal Bond-A (JHTFX) boasts a one-year return of 16.31%, yet FRMOX’s focus on Missouri-specific tax benefits makes it uniquely appealing to residents of the state. While FRMOX’s expense ratio of 0.68% is higher than some peers, its targeted tax advantages and strong correlation with its benchmark make it a compelling choice for Missouri investors.
Expense Ratio and Cost Efficiency
The expense ratio of FRMOX stands at 0.68%, which is relatively competitive within the municipal bond fund category. While some similar funds may offer lower expense ratios, FRMOX’s cost is justified by its focus on providing tax-exempt income specifically for Missouri residents. This targeted approach can result in significant tax savings for investors, potentially offsetting the higher expense ratio. Additionally, the fund’s strong performance and risk management metrics suggest that investors are receiving value for the cost. For those prioritizing tax efficiency and income generation, the expense ratio is a reasonable trade-off for the benefits provided by the fund.
Suitability for Income-Focused Investors
FRMOX is particularly well-suited for income-focused investors residing in Missouri who are seeking to maximize their after-tax income. The fund’s emphasis on municipal bonds ensures a steady stream of tax-exempt income, making it an attractive option for those in higher tax brackets. Its strong correlation with the benchmark and competitive yield further enhance its appeal. However, potential investors should consider the fund’s limited geographic focus and the recent negative three-year return. Despite these considerations, FRMOX remains a viable choice for those prioritizing tax efficiency and stable income, especially in the context of a diversified investment portfolio.
Conclusion: A Strategic Choice for Missouri Residents
In conclusion, Franklin MO Tax-Free Income-A1 (FRMOX) stands out as a strategic investment choice for Missouri residents seeking tax-exempt income. Its focus on municipal bonds provides a reliable income stream, while its competitive yield and strong performance metrics underscore its potential for delivering consistent returns. The fund’s targeted approach to tax efficiency makes it particularly appealing to investors in higher tax brackets. While the expense ratio is higher than some peers, the tax benefits and income potential justify the cost for many investors. Overall, FRMOX is a compelling option for those looking to enhance their income while minimizing tax liabilities, making it a valuable addition to a diversified investment strategy.
Similar Securities
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.
PRVAX: TRPrice VA Tax-Free Bond-Inv | Tax-Free Income from Virginia Bonds
PRVAX offers tax-free income with a 3.15% yield, focusing on Virginia municipal bonds. It stands out with a 0.55% expense ratio and strong risk metrics.
FRVAX: Franklin VA Tax-Free Income-A1 | Tax-Exempt Income for Virginia Investors
FRVAX offers tax-free income for Virginia residents with a competitive 2.84% yield and a 0.73% expense ratio, focusing on municipal bonds.
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%.
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/FRMOX/”>Yahoo: Franklin MO Tax-Free Income-A1
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