Any investors hoping to find a Muni - Bonds fund could think about starting with T. Rowe Price Tax Free Income Adviser (PATAX Quick QuotePATAX - Free Report) . PATAX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

PATAX 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

PATAX finds itself in the T. Rowe Price family, based out of Baltimore, MD. T. Rowe Price Tax Free Income Adviser debuted in October of 1976. Since then, PATAX has accumulated assets of about $27.00 million, according to the most recently available information. The fund is currently managed by Timothy Taylor who has been in charge of the fund since January of 2023.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 1.11%, and is in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 5.57%, 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. The standard deviation of PATAX over the past three years is 6.79% compared to the category average of 10.38%. The standard deviation of the fund over the past 5 years is 6.54% compared to the category average of 11.19%. 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.

For investors who think interest rates will rise, this is an important factor to consider. PATAX has a modified duration of 7.86, which suggests that the fund will decline 7.86% for every hundred-basis-point increase in interest rates.

Income

Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 4.84% means that a $10,000 investment should result in a yearly payout of $484.

A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks.

PATAX carries a beta of 0.7, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 0.07, which measures performance on a risk-adjusted basis.

Ratings

Investors should also consider a bond's rating, which is a grade "AAA" to "D" given to a bond that indicates its credit quality. With this letter scale in mind, PATAX has 51.72% in high quality bonds rated at least "AA" or higher, while 35.47% are of medium quality, with ratings of "A" to "BBB". The fund has an average quality of A, and focuses on high quality securities.

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, PATAX is a no load fund. It has an expense ratio of 0.76% compared to the category average of 0.84%. From a cost perspective, PATAX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $2,500 and that each subsequent investment needs to be at $100.

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

Bottom Line

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

This could just be the start of your research on PATAX in the Muni - Bonds category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.