FTOIX
Franklin OH Tax-Free Income-A1
Tax-Exempt Income for Ohio Residents
Franklin OH Tax-Free Income-A1 (FTOIX) is a municipal bond fund designed to provide investors with income that is exempt from federal and Ohio state taxes. This makes it particularly attractive for Ohio residents seeking to maximize their after-tax income. The fund’s primary objective is to deliver a high level of tax-exempt income while preserving capital, making it a prudent choice for investors looking to minimize tax liabilities. With a yield of 3.22%, FTOIX 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
FTOIX offers Ohio residents tax-exempt income with a 3.22% yield and a competitive 0.66% expense ratio, focusing on municipal bonds.
Pros:
- Tax-exempt income for Ohio residents Competitive yield of 3.22% Strong correlation with benchmark
Cons:
- Limited to Ohio municipal bonds Higher expense ratio than some peers Negative three-year return
Performance in the Municipal Bond Sector
FTOIX has demonstrated a solid performance in the municipal bond sector, with a one-year return of 8.77%, outperforming its benchmark, the BBG Muni USD Index, which returned 7.51% over the same period. This performance is indicative of the fund’s effective management and strategic allocation within the municipal bond market. However, the fund’s three-year return is -1.15%, which suggests some volatility and challenges in recent years. Despite this, the fund’s long-term performance since inception remains strong at 4.73%, highlighting its potential for consistent returns over time.
Risk Metrics and Stability
The risk metrics for FTOIX indicate a relatively stable investment with a beta of 1.05, suggesting it moves closely with the market. The fund’s alpha of 1.25% indicates it has outperformed its benchmark on a risk-adjusted basis. The Sharpe ratio of 0.37 and Treynor ratio of 1.19 further emphasize the fund’s ability to provide returns relative to its risk. With a standard deviation of 0.99%, FTOIX exhibits low volatility, making it a suitable option for risk-averse investors. The fund’s downside risk is also minimal, with a downside risk (UI) of 0.73, indicating limited potential for significant losses.
Portfolio Composition and Top Holdings
FTOIX’s portfolio is heavily concentrated in municipal bonds, with 99.45% of its assets allocated to this sector. This focus aligns with the fund’s objective of providing tax-exempt income. The top holdings include various Ohio municipal bonds, such as the Miami Valley Career Technical Center and Hudson Ohio City School District bonds, which offer attractive yields and contribute to the fund’s overall income generation. The fund’s strategic selection of high-quality municipal bonds helps ensure a steady income stream while maintaining a low-risk profile.
Comparative Analysis with Similar Funds
When compared to similar funds, FTOIX holds its ground with a competitive yield of 3.22% and an expense ratio of 0.66%. While its one-year return of 8.77% is commendable, some peers like JHancock High-Yield Municipal Bond-A (JHTFX) have outperformed with a 16.31% return. However, FTOIX’s focus on Ohio municipal bonds provides a unique advantage for Ohio residents seeking state tax-exempt income. The fund’s beta of 1.05 is higher than some peers, indicating a closer correlation with market movements, which can be beneficial in stable market conditions.
Expense Ratio and Cost Efficiency
FTOIX’s expense ratio of 0.66% is competitive within the municipal bond fund category, though slightly higher than some peers. This cost is justified by the fund’s strategic management and the tax-exempt benefits it offers to Ohio residents. Investors should weigh the expense ratio against the potential tax savings and income generation when considering this fund. The fund’s management by Franklin Templeton Investments, a reputable firm, adds an additional layer of confidence in its cost efficiency and overall performance.
Suitability for Income-Focused Investors
FTOIX is particularly suitable for income-focused investors residing in Ohio who are looking to maximize their after-tax income. The fund’s focus on municipal bonds ensures a steady income stream, while its tax-exempt status provides significant tax savings. This makes it an ideal choice for investors in higher tax brackets. Additionally, the fund’s low volatility and strong correlation with its benchmark make it a stable investment option for those seeking consistent income without taking on excessive risk.
Conclusion: A Strategic Choice for Ohio Residents
In conclusion, Franklin OH Tax-Free Income-A1 (FTOIX) stands out as a strategic investment choice for Ohio residents seeking tax-exempt income. Its focus on municipal bonds, competitive yield, and strong performance relative to its benchmark make it an attractive option for income-focused investors. While the fund’s expense ratio is slightly higher than some peers, the tax benefits and income potential it offers can outweigh these costs. Overall, FTOIX is well-suited for investors looking to enhance their income while minimizing tax liabilities, particularly those residing in Ohio.
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Futher Reading
https://finance.yahoo.com/quote/FTOIX/”>Yahoo: Franklin OH Tax-Free Income-A1
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