FRNJX
Franklin NJ Tax-Free Income-A1
Maximizing Tax-Exempt Income for NJ Residents
The Franklin NJ Tax-Free Income-A1 (FRNJX) is specifically designed to provide investors with a maximum level of income exempt from personal income taxes, particularly for residents of New Jersey. This fund is an attractive option for those looking to minimize their tax liabilities while still earning a steady income. By investing at least 80% of its total assets in securities that pay interest free from New Jersey state taxes, FRNJX offers a unique advantage for state residents. The fund’s focus on municipal bonds ensures that investors can benefit from tax-exempt income, making it a strategic choice for those in higher tax brackets seeking to optimize their after-tax returns.
At A Glance
Executive Summary
FRNJX offers NJ tax-exempt income with a 3.09% yield and 0.68% expense ratio, ideal for state residents seeking municipal bond exposure.
Tax-exempt income for NJ residents Strong correlation with benchmark Competitive yield of 3.09%
Limited sector diversification Higher expense ratio than some peers Potentially lower returns compared to high-yield options
Performance Amidst Market Fluctuations
FRNJX has demonstrated resilience amidst market fluctuations, with a one-year return of 8.40%, 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 while maintaining a focus on tax-exempt income. The fund’s alpha of 0.88% and beta of 1.05 suggest a slightly higher risk profile compared to the benchmark, yet it has managed to deliver superior returns. Investors seeking a fund that can provide consistent returns while mitigating tax liabilities will find FRNJX’s performance appealing.
Strategic Portfolio Composition
The portfolio of FRNJX is heavily weighted towards municipal bonds, with 99.77% of its assets allocated to this sector. This strategic allocation underscores the fund’s commitment to providing tax-exempt income. The top holdings include significant investments in New Jersey-based projects, such as the Newark Housing Authority and the New Jersey Turnpike Authority, which not only support local infrastructure but also align with the fund’s objective of maximizing tax-free income for state residents. This focus on local projects can provide investors with a sense of contributing to the community while benefiting from tax advantages.
Comparative Analysis with Similar Funds
When compared to similar funds, FRNJX holds its ground with a competitive yield of 3.09% and an expense ratio of 0.68%. While funds like TRPrice Tax-Free High Yield-Inv (PRFHX) and JHancock High-Yield Municipal Bond-A (JHTFX) offer higher yields, they also come with higher risk profiles. FRNJX’s correlation with its benchmark at 98.77% indicates a strong alignment with market movements, providing a stable investment option for those prioritizing tax-exempt income over high-risk, high-reward strategies. This makes FRNJX a suitable choice for conservative investors seeking steady, tax-efficient returns.
Risk Metrics and Investor Implications
FRNJX’s risk metrics reveal a balanced approach to risk management. With a standard deviation of 0.99% and a Sharpe Ratio of 0.26, the fund exhibits moderate volatility, which is typical for municipal bond funds. The Treynor Ratio of 0.84 further indicates that the fund is effectively compensating investors for the risk taken. The max drawdown of -2.3% highlights the fund’s ability to withstand market downturns, although investors should be aware of the potential for short-term losses. Overall, FRNJX’s risk profile is suitable for investors who are risk-averse but still seek to benefit from tax-exempt income.
Expense Ratio and Cost Efficiency
The expense ratio of FRNJX stands at 0.68%, which is relatively competitive within the municipal bond fund category. While some similar funds offer lower expense ratios, FRNJX provides a balance between cost and performance. The fund’s management by Franklin Templeton Investments, a reputable firm with extensive experience in managing municipal bond portfolios, adds value to the investment despite the slightly higher cost. Investors should consider the expense ratio in the context of the fund’s overall performance and tax benefits, which can offset the costs associated with managing the fund.
Yield and Income Potential
FRNJX offers a yield of 3.09%, which is attractive for investors seeking regular income that is exempt from New Jersey state taxes. This yield is competitive within the municipal bond fund space, providing a reliable income stream for investors. The fund’s focus on high-quality municipal bonds ensures that the income generated is stable and consistent, making it an ideal choice for income-focused investors. The yield, combined with the tax-exempt status, enhances the fund’s appeal to those looking to maximize their after-tax income, particularly in a low-interest-rate environment.
Conclusion: A Strategic Choice for Tax-Conscious Investors
In conclusion, the Franklin NJ Tax-Free Income-A1 (FRNJX) stands out as a strategic investment for New Jersey residents seeking to maximize tax-exempt income. With its strong performance, competitive yield, and focus on local municipal bonds, the fund offers a compelling option for those in higher tax brackets. While the expense ratio is slightly higher than some peers, the benefits of tax-exempt income and the fund’s alignment with its benchmark make it a worthwhile consideration. FRNJX is particularly suitable for conservative investors who prioritize tax efficiency and stable income over high-risk, high-reward opportunities.
Similar Securities
ORSTX: Invesco Short Term Municipal-A | Tax-Exempt Income Investment
ORSTX offers tax-exempt income with a 3.23% yield, focusing on short-term municipal bonds. Its 0.74% expense ratio is competitive in its category.
FCAMX: Franklin CA High-Yield Municipal-A1 | Tax-Exempt Income for California Investors
FCAMX offers a 4.06% yield with tax-exempt income, outperforming its benchmark with a 1-year return of 11.50%.
OPCAX: Invesco CA Muni-A | Tax-Exempt Income for California Investors
OPCAX offers a 3.80% yield with tax-exempt income, focusing on California municipal bonds. It has a high correlation with its benchmark and a 1.18% expense ratio.
ISHAX: Invesco Short-Duration High-Yield Muni-A | Tax-Exempt Income Investment
ISHAX offers a 4.05% yield with a focus on tax-exempt income, outperforming its benchmark with a 10.31% 1-year return.
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.
Futher Reading
https://finance.yahoo.com/quote/FRNJX/”>Yahoo: Franklin NJ Tax-Free Income-A1
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