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If you've been stuck searching for Muni - Bonds funds, consider T. Rowe Price Tax Free High Yield Retail (PRFHX - Free Report) as a possibility. PRFHX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
PRFHX is one of many Muni - Bonds funds to choose from. Muni - Bonds funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. These securities can be backed by taxes (revenue bonds), but others are known as " general obligation " and are not necessarily backed by a defined source. These bonds are especially attractive because of their inherent tax benefits.
History of Fund/Manager
T. Rowe Price is based in Baltimore, MD, and is the manager of PRFHX. T. Rowe Price Tax Free High Yield Retail debuted in March of 1985. Since then, PRFHX has accumulated assets of about $3.89 billion, according to the most recently available information. The fund is currently managed by James M. Murphy who has been in charge of the fund since January of 2001.
Performance
Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 4.16%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 4%, which places it in the top third during this time-frame.
When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of PRFHX over the past three years is 3.48% compared to the category average of 6.84%. Looking at the past 5 years, the fund's standard deviation is 4.57% compared to the category average of 6.91%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
If you believe interest rates will rise, this is an important factor to look at. PRFHX has a modified duration of 7.27, which suggests that the fund will decline 7.27% for every hundred-basis-point increase in interest rates.
Income
We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.34% means that a $10,000 investment should result in a yearly payout of $534.
While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks. With a beta of 1.02, this fund is more volatile than a broad market index of fixed income securities. Taking this into account, PRFHX has a positive alpha of 0.65, which measures performance on a risk-adjusted basis.
Ratings
Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, PRFHX is a no load fund. It has an expense ratio of 0.71% compared to the category average of 0.87%. Looking at the fund from a cost perspective, PRFHX is actually cheaper than its peers.
This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $100.
Bottom Line
Overall, T. Rowe Price Tax Free High Yield Retail has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, T. Rowe Price Tax Free High Yield Retail looks like a good potential choice for investors right now.
Don't stop here for your research on Muni - Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare PRFHX to its peers as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.
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Is PRFHX a Strong Bond Fund Right Now?
If you've been stuck searching for Muni - Bonds funds, consider T. Rowe Price Tax Free High Yield Retail (PRFHX - Free Report) as a possibility. PRFHX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
PRFHX is one of many Muni - Bonds funds to choose from. Muni - Bonds funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. These securities can be backed by taxes (revenue bonds), but others are known as " general obligation " and are not necessarily backed by a defined source. These bonds are especially attractive because of their inherent tax benefits.
History of Fund/Manager
T. Rowe Price is based in Baltimore, MD, and is the manager of PRFHX. T. Rowe Price Tax Free High Yield Retail debuted in March of 1985. Since then, PRFHX has accumulated assets of about $3.89 billion, according to the most recently available information. The fund is currently managed by James M. Murphy who has been in charge of the fund since January of 2001.
Performance
Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 4.16%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 4%, which places it in the top third during this time-frame.
When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of PRFHX over the past three years is 3.48% compared to the category average of 6.84%. Looking at the past 5 years, the fund's standard deviation is 4.57% compared to the category average of 6.91%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
If you believe interest rates will rise, this is an important factor to look at. PRFHX has a modified duration of 7.27, which suggests that the fund will decline 7.27% for every hundred-basis-point increase in interest rates.
Income
We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.34% means that a $10,000 investment should result in a yearly payout of $534.
While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks. With a beta of 1.02, this fund is more volatile than a broad market index of fixed income securities. Taking this into account, PRFHX has a positive alpha of 0.65, which measures performance on a risk-adjusted basis.
Ratings
Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, PRFHX is a no load fund. It has an expense ratio of 0.71% compared to the category average of 0.87%. Looking at the fund from a cost perspective, PRFHX is actually cheaper than its peers.
This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $100.
Bottom Line
Overall, T. Rowe Price Tax Free High Yield Retail has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, T. Rowe Price Tax Free High Yield Retail looks like a good potential choice for investors right now.
Don't stop here for your research on Muni - Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare PRFHX to its peers as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.