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There are plenty of choices in the Muni - Bonds category, but where should you start your research? Well, one fund that might be worth investigating is American Funds Tax-Advantaged Income F1 (TAIFX - Free Report) . TAIFX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
Zacks categorizes TAIFX as Muni - Bonds, which is a segment packed with options. Muni - Bonds funds invest in debt securities issued by states or local municipalities. These are generally used to finance construction of infrastructure, pay for schools, or other government functions. Some are backed by taxes (revenue bonds), while others are " general obligation " and may not be backed by a defined source. Investors usually appreciate the tax benefits that come with many municipal bonds, which are especially impressive for those in high tax brackets.
History of Fund/Manager
American Funds is based in Los Angeles, CA, and is the manager of TAIFX. American Funds Tax-Advantaged Income F1 debuted in May of 2012. Since then, TAIFX has accumulated assets of about $134 million, according to 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 7.04%, 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 6.3%, 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. Over the past three years, TAIFX's standard deviation comes in at 5.04%, compared to the category average of 7.32%. The standard deviation of the fund over the past 5 years is 5.09% compared to the category average of 7.33%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.
For investors who think interest rates will rise, this is an important factor to consider. TAIFX has a modified duration of 6.7, which suggests that the fund will decline 6.7% for every hundred-basis-point increase in interest rates.
TAIFX carries a beta of 0.50, 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 5.38, 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, TAIFX has 41.34% in high quality bonds rated at least 'AA' or higher, while 36.12% 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, TAIFX is a no load fund. It has an expense ratio of 0.39% compared to the category average of 0.87%. So, TAIFX is actually cheaper than its peers from a cost perspective.
Investors should also note that the minimum initial investment for the product is $250 and that each subsequent investment needs to be at $50.
Bottom Line
Overall, American Funds Tax-Advantaged Income F1 has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, American Funds Tax-Advantaged Income F1 looks like a good potential choice for investors right now.
Your research on the Muni - Bonds segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.
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Is TAIFX a Strong Bond Fund Right Now?
There are plenty of choices in the Muni - Bonds category, but where should you start your research? Well, one fund that might be worth investigating is American Funds Tax-Advantaged Income F1 (TAIFX - Free Report) . TAIFX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
Zacks categorizes TAIFX as Muni - Bonds, which is a segment packed with options. Muni - Bonds funds invest in debt securities issued by states or local municipalities. These are generally used to finance construction of infrastructure, pay for schools, or other government functions. Some are backed by taxes (revenue bonds), while others are " general obligation " and may not be backed by a defined source. Investors usually appreciate the tax benefits that come with many municipal bonds, which are especially impressive for those in high tax brackets.
History of Fund/Manager
American Funds is based in Los Angeles, CA, and is the manager of TAIFX. American Funds Tax-Advantaged Income F1 debuted in May of 2012. Since then, TAIFX has accumulated assets of about $134 million, according to 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 7.04%, 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 6.3%, 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. Over the past three years, TAIFX's standard deviation comes in at 5.04%, compared to the category average of 7.32%. The standard deviation of the fund over the past 5 years is 5.09% compared to the category average of 7.33%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.
For investors who think interest rates will rise, this is an important factor to consider. TAIFX has a modified duration of 6.7, which suggests that the fund will decline 6.7% for every hundred-basis-point increase in interest rates.
TAIFX carries a beta of 0.50, 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 5.38, 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, TAIFX has 41.34% in high quality bonds rated at least 'AA' or higher, while 36.12% 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, TAIFX is a no load fund. It has an expense ratio of 0.39% compared to the category average of 0.87%. So, TAIFX is actually cheaper than its peers from a cost perspective.
Investors should also note that the minimum initial investment for the product is $250 and that each subsequent investment needs to be at $50.
Bottom Line
Overall, American Funds Tax-Advantaged Income F1 has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, American Funds Tax-Advantaged Income F1 looks like a good potential choice for investors right now.
Your research on the Muni - Bonds segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.