FXNCX
Franklin NC Tax-Free Income-A1
Tax-Free Income for North Carolina Residents
The Franklin NC Tax-Free Income-A1 (FXNCX) is designed to provide investors with a high level of income that is exempt from both federal and North Carolina state personal income taxes. This makes it particularly attractive for residents of North Carolina who are looking to maximize their after-tax income. The fund achieves this by investing at least 80% of its total assets in 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 sets FXNCX apart from many other investment options, making it a compelling choice for tax-sensitive investors.
At A Glance
Executive Summary
FXNCX offers tax-free income for NC residents with a competitive 2.78% yield and a 0.70% expense ratio, focusing on municipal bonds.
Tax-free income for NC residents Competitive yield of 2.78% Strong correlation with benchmark
Higher expense ratio than some peers Limited sector diversification Potential interest rate sensitivity
Performance Amidst Market Fluctuations
FXNCX has demonstrated resilience amidst market fluctuations, with a notable 1-year return of 8.84%, 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 varying market conditions effectively. The fund’s alpha of 1.32% suggests that it has generated returns above the expected benchmark performance, while its beta of 1.15 indicates a slightly higher volatility compared to the benchmark. These metrics highlight the fund’s potential for delivering superior returns while managing risk, making it an attractive option for investors seeking both stability and growth.
Strategic Portfolio Composition
The portfolio of FXNCX is strategically composed to maximize tax-free income while maintaining a high level of credit quality. The fund’s top holdings include various North Carolina municipal bonds, such as the North Carolina Med Care Commission Health Care Facilities Revenue bonds and the New Hanover County Hospital Revenue bonds. These holdings reflect the fund’s commitment to investing in high-quality municipal securities that offer attractive yields. With a 99.71% allocation to municipal bonds, FXNCX ensures that its investors benefit from the tax advantages associated with these securities, while also providing a stable income stream.
Comparative Analysis with Similar Funds
When compared to similar funds, FXNCX holds its ground with a competitive yield of 2.78% and an expense ratio of 0.70%. While funds like the TRPrice Tax-Free High Yield-Inv (PRFHX) and Dupree NC Tax-Free Income (NTFIX) offer higher yields, FXNCX’s focus on North Carolina municipal bonds provides a unique tax advantage for residents of the state. Additionally, FXNCX’s strong correlation with its benchmark (98.53%) and a high R-squared value of 97.08% indicate that it closely tracks the performance of the municipal bond market, providing investors with a reliable investment option.
Risk and Return Metrics
FXNCX exhibits a balanced risk-return profile, as evidenced by its Sharpe Ratio of 0.35 and Treynor Ratio of 1.14. These metrics suggest that the fund offers a reasonable return for the level of risk taken. The fund’s standard deviation of 1.09% indicates relatively low volatility, which is appealing to risk-averse investors. Furthermore, the fund’s downside risk (UI) of 0.86 and a maximum drawdown of -2.5% highlight its ability to mitigate losses during market downturns. These risk metrics underscore FXNCX’s suitability for investors seeking a stable income with moderate risk exposure.
Expense Ratio and Cost Efficiency
The expense ratio of FXNCX stands at 0.70%, which is competitive within the municipal bond fund category. While some similar funds may offer lower expense ratios, FXNCX’s focus on providing tax-free income for North Carolina residents justifies its cost structure. The fund’s management team leverages its expertise in municipal bonds to deliver value to investors, ensuring that the benefits of tax-free income outweigh the costs associated with the fund. This cost efficiency, combined with the fund’s strong performance, makes FXNCX a viable option for cost-conscious investors.
Investor Suitability and Strategic Fit
FXNCX is particularly well-suited for investors who are residents of North Carolina and are seeking to maximize their after-tax income. The fund’s focus on municipal bonds that are exempt from both federal and state taxes provides a unique advantage for these investors. Additionally, the fund’s strong performance metrics and strategic portfolio composition make it an attractive option for those looking to balance income generation with risk management. Investors who prioritize tax efficiency and are comfortable with the fund’s risk profile will find FXNCX to be a strategic fit for their investment portfolios.
Conclusion: A Compelling Choice for Tax-Sensitive Investors
In conclusion, the Franklin NC Tax-Free Income-A1 (FXNCX) stands out as a compelling choice for tax-sensitive investors, particularly those residing in North Carolina. With its focus on providing tax-free income, competitive yield, and strategic portfolio composition, the fund offers a unique value proposition. While it may have a higher expense ratio compared to some peers, the tax advantages and strong performance metrics make it a worthwhile consideration for investors seeking to enhance their after-tax income. FXNCX’s ability to deliver stable returns with moderate risk further solidifies its position as a top choice for municipal bond investors.
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.
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.
SBNYX: Western Asset NY Municipals-A | Tax-Exempt Income for NY Investors
SBNYX offers NY tax-exempt income with a 3.05% yield and 0.8% expense ratio, ideal for tax-sensitive investors.
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.
Futher Reading
https://finance.yahoo.com/quote/FXNCX/”>Yahoo: Franklin NC Tax-Free Income-A1
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