FRORX
Franklin OR Tax-Free Income-A1
Tax-Exempt Income for Oregon Residents
The Franklin OR Tax-Free Income-A1 fund (FRORX) is specifically designed to provide a high level of income exempt from both federal and Oregon state personal income taxes. This makes it an attractive option for Oregon residents seeking to maximize their after-tax income. The fund achieves this by investing at least 80% of its total assets in securities that pay interest free from personal income taxes. This focus on tax efficiency is a key feature that distinguishes FRORX from other municipal bond funds, making it particularly appealing to investors in higher tax brackets who are looking to reduce their tax liabilities while maintaining a steady income stream.
At A Glance
Executive Summary
FRORX offers tax-exempt income for Oregon residents with a 3.17% yield and a competitive 0.67% expense ratio, focusing on municipal bonds.
Tax-exempt income for Oregon residents Competitive expense ratio Strong correlation with benchmark
Limited geographic diversification Potentially lower returns compared to peers High beta indicating volatility
Performance in the Municipal Bond Sector
FRORX has demonstrated a solid performance within the municipal bond sector, with a one-year return of 8.28%, 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, when compared to similar funds like the JHancock High-Yield Municipal Bond-A, which posted a 16.31% return, FRORX’s performance appears more conservative. This suggests that while FRORX offers stability and tax benefits, it may not be the best choice for investors seeking high returns.
Portfolio Composition and Top Holdings
The fund’s portfolio is heavily weighted towards municipal bonds, with 99.71% of its assets allocated to this sector. This concentration underscores the fund’s commitment to providing tax-exempt income. The top holdings include significant investments in Oregon state facilities and school district bonds, such as the Oregon State Facilities Authority Revenue bonds and the Multnomah-Clackamas Counties Centennial School District bonds. These holdings reflect a strategic focus on high-quality, tax-exempt securities that support the fund’s objective of delivering consistent income while minimizing tax liabilities for its investors.
Risk Metrics and Volatility
FRORX exhibits a beta of 1.04, indicating that it is slightly more volatile than the market. The fund’s standard deviation of 0.98% and a Sharpe ratio of 0.23 suggest moderate risk-adjusted returns. The high correlation with its benchmark (98.90%) and an R-squared value of 97.82% indicate that the fund’s performance closely tracks the municipal bond market. Despite a maximum drawdown of -2.3%, the fund has shown resilience, with a relatively short drawdown length. These metrics suggest that while FRORX is subject to market fluctuations, it remains a stable option for risk-averse investors seeking tax-exempt income.
Expense Ratio and Cost Efficiency
With an expense ratio of 0.67%, FRORX is competitively priced within the municipal bond fund category. This low expense ratio is a significant advantage for investors, as it allows more of the fund’s returns to be passed on to shareholders. In comparison to similar funds, FRORX’s expense ratio is on par with its peers, such as the TRPrice Tax-Free High Yield-Inv, which has an expense ratio of 0.67%. This cost efficiency, combined with the fund’s tax-exempt income focus, makes FRORX an attractive option for cost-conscious investors looking to maximize their net returns.
Comparative Analysis with Similar Funds
When compared to similar funds, FRORX offers a unique value proposition with its focus on Oregon tax-exempt income. However, it faces stiff competition from funds like the JHancock High-Yield Municipal Bond-A, which offers higher yields and returns. While FRORX’s yield of 3.17% is competitive, it is lower than some peers, such as the Dupree NC Tax-Free Income, which offers a yield of 4.43%. Investors must weigh the benefits of FRORX’s tax-exempt status against the potential for higher returns from other funds. This comparative analysis highlights the importance of aligning investment choices with individual financial goals and tax considerations.
Investor Suitability and Strategic Fit
FRORX is particularly well-suited for Oregon residents in higher tax brackets who prioritize tax-exempt income. Its focus on municipal bonds provides a stable income stream with the added benefit of tax savings. The fund’s conservative approach and strong correlation with the municipal bond market make it an ideal choice for risk-averse investors seeking steady, tax-efficient returns. However, investors seeking higher growth potential or geographic diversification may need to consider other options. FRORX’s strategic fit is best for those who value tax efficiency and are comfortable with the fund’s focus on Oregon-based securities.
Conclusion: A Tax-Efficient Choice for Oregon Investors
In conclusion, the Franklin OR Tax-Free Income-A1 fund stands out for its focus on providing tax-exempt income to Oregon residents. With a competitive expense ratio and a strong correlation with its benchmark, FRORX offers a stable and tax-efficient investment option. While it may not deliver the highest returns compared to some peers, its tax benefits and focus on municipal bonds make it a compelling choice for investors seeking to maximize after-tax income. For those prioritizing tax efficiency and stability, FRORX is a prudent addition to a diversified investment portfolio.
Similar Securities
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.
FRORX: Franklin OR Tax-Free Income-A1 | Tax-Exempt Income for Oregon Residents
FRORX offers tax-exempt income for Oregon residents with a 3.17% yield and a competitive 0.67% expense ratio, focusing on municipal bonds.
SHRCX: Western Asset CA Municipals-A | Tax-Exempt Income for CA Investors
SHRCX offers tax-exempt income for CA investors with a 0.75% expense ratio and 2.97% yield, focusing on capital preservation.
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.
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.
Futher Reading
https://finance.yahoo.com/quote/FRORX/”>Yahoo: Franklin OR Tax-Free Income-A1
Disclaimer: The information provided on this website is for informational purposes only and should not be construed as financial, investment, or other professional advice. PeepFinance does not endorse or recommend any specific securities, investments, or strategies. The opinions expressed are solely those of the authors and are not intended to be used as the basis for any investment decisions. All investments carry risks, and readers are encouraged to conduct their own research or consult with a financial professional before making any financial decisions. PeepFinance and its authors are not responsible for any losses or damages arising from the use of this information.