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Is PRFHX a Strong Bond Fund Right Now?

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Having trouble finding a Muni - Bonds fund? T. Rowe Price Tax Free High Yield Retail (PRFHX - Free Report) is a potential starting point. PRFHX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on various 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

PRFHX finds itself in the T. Rowe Price family, based out of Baltimore, MD. T. Rowe Price Tax Free High Yield Retail debuted in March of 1985. Since then, PRFHX has accumulated assets of about $1.83 billion, according to the most recently available information. The fund's current manager, James M. Murphy, has been in charge of the fund since January of 2001.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 1.49%, and it sits in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of -0.22%, which places it in the middle third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

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. Over the past three years, PRFHX's standard deviation comes in at 8.88%, compared to the category average of 12.47%. Over the past 5 years, the standard deviation of the fund is 8.73% compared to the category average of 13.01%. This makes the fund less volatile than its peers over the past half-decade.

With a beta of 0.89, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, PRFHX has a positive alpha of 0.91, which measures performance on a risk-adjusted basis.

Ratings

However, it is worth noting that 41 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, PRFHX is a no load fund. It has an expense ratio of 0.67% compared to the category average of 0.92%. 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.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, T. Rowe Price Tax Free High Yield Retail ( PRFHX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on the Muni - Bonds area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into PRFHX too for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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