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Is TAIFX a Strong Bond Fund Right Now?

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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 possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify TAIFX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.

History of Fund/Manager

American Funds is based in Los Angeles, CA, and is the manager of TAIFX. Since American Funds Tax-Advantaged Income F1 made its debut in May of 2012, TAIFX has garnered more than $247 million in assets. The fund is currently managed by a team of investment professionals.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 4.41%, and it sits in the top 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 4.16%, 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 7.73%, compared to the category average of 11.7%. The standard deviation of the fund over the past 5 years is 6.89% compared to the category average of 10.72%. This makes the fund less volatile than its peers over the past half-decade.

This fund has a beta of 0.37, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, TAIFX has a positive alpha of 2.22, which measures performance on a risk-adjusted basis.

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, TAIFX is a no load fund. It has an expense ratio of 0.39% compared to the category average of 0.82%. Looking at the fund from a cost perspective, TAIFX is actually cheaper than its peers.

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 ( TAIFX ) 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 ( TAIFX ) 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 TAIFX 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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