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If you have been looking for Muni - Bonds fund category, a potential starting could be Franklin California Tax-Free Income A (FKTFX - Free Report) . FKTFX possesses a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.
Objective
FKTFX 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
Franklin is responsible for FKTFX, and the company is based out of San Mateo, CA. The Franklin California Tax-Free Income A made its debut in February of 1977 and FKTFX has managed to accumulate roughly $6.28 billion in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 0.51%, and is in the middle 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 3.95%, 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. FKTFX's standard deviation over the past three years is 6.44% compared to the category average of 10.25%. Looking at the past 5 years, the fund's standard deviation is 7.03% compared to the category average of 11.52%. 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. FKTFX has a modified duration of 8.16, which suggests that the fund will decline 8.16% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.85% means that a $10,000 investment should result in a yearly payout of $485.
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. Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture.
With a beta of 0.71, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, FKTFX has a positive alpha of 0.08 , which measures performance on a risk-adjusted basis.
Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FKTFX is a load fund and it has an expense ratio of 0.61%.
Investors should also note that the minimum initial investment for the product is $1,000 and that each subsequent investment has no minimum amount.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
With a rank of 'hold' we aren't getting a good signal one way or another on FKTFX. That is why it might be a good idea to consider other items, such as the fund's expense ratio of .61%, and how this compares to other potential options being considered for investment. If cheaper, it might make a decent choice, but a more expensive fund might be worth avoiding. Just make sure to pay attention to its rank in case it shifts in the near future.
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 FKTFX too for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.
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Is FKTFX a Strong Bond Fund Right Now?
If you have been looking for Muni - Bonds fund category, a potential starting could be Franklin California Tax-Free Income A (FKTFX - Free Report) . FKTFX possesses a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.
Objective
FKTFX 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
Franklin is responsible for FKTFX, and the company is based out of San Mateo, CA. The Franklin California Tax-Free Income A made its debut in February of 1977 and FKTFX has managed to accumulate roughly $6.28 billion in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 0.51%, and is in the middle 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 3.95%, 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. FKTFX's standard deviation over the past three years is 6.44% compared to the category average of 10.25%. Looking at the past 5 years, the fund's standard deviation is 7.03% compared to the category average of 11.52%. 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. FKTFX has a modified duration of 8.16, which suggests that the fund will decline 8.16% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.85% means that a $10,000 investment should result in a yearly payout of $485.
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. Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture.
With a beta of 0.71, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, FKTFX has a positive alpha of 0.08 , which measures performance on a risk-adjusted basis.Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FKTFX is a load fund and it has an expense ratio of 0.61%.
Investors should also note that the minimum initial investment for the product is $1,000 and that each subsequent investment has no minimum amount.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
With a rank of 'hold' we aren't getting a good signal one way or another on FKTFX. That is why it might be a good idea to consider other items, such as the fund's expense ratio of .61%, and how this compares to other potential options being considered for investment. If cheaper, it might make a decent choice, but a more expensive fund might be worth avoiding. Just make sure to pay attention to its rank in case it shifts in the near future.
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 FKTFX too for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.