MFOHome About Commentary Discussions Funds The Best Resources Support Us!

Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

Sign In Register

Categories

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Do You Think California Muni's are Worth Holding?

CathyGCathyG
edited June 2013 in Fund Discussions
I hold FCTFX (long term) and BCITX (intermediate). Bought them for tax relief and after checked M* review/rating (Gold on FCTFX). Both have gone down since, along with other muni's... just not as much.

But, after watching my Portfolio ZOOM DOWN with almost ALL my bond funds losing more daily than I've ever seen before, I'm really wary of keeping many long-term anymore. I've added IRNIX, AKREX and THBVX, along with 3 allocation funds (PVSYX, GLRBX and ICMBX). I am keeping my VWINX, BERIX, PGDIX allocation funds, along with most of PONDX, OSTIX, DLTNX, THOPX, RPHYX bond funds and YACKX and ICMAX funds.

Would you sell either muni (especially FCTFX with lipper 3/3/3/3/5), or do you think CA muni's will start even a minor comeback in the next 6 months? If sell, which of the above funds would you add to considering the current... and expected 1 year future.... market?

Hope you can help me decide. Thanks! Cathy

Comments

  • Sven
    Sorry, didn't see your post...

    For now bonds have been over-sold because of Fed's tapering of $85M monthly bond purchase. The yields have risen quickly in the last few weeks that impact negatively particularly the longer duration funds including FCTFX.

    As for your question, you need to review the original question of why you bought these muni funds. I believe that long duration funds carry higher interest rate risk and the higher yield is not sufficient to compensate for risk when the rate goes higher. Shorter term funds are better bet even the yields are lower. Even though the intermediate term munis are in the sweet spot between risk an return. They have hit badly but not as badly as the longer counterpart.

    The other issue is the single state muni fund you invested. Unless you are in the highest tax bracket and living in a high income state such as California, there is little reason not to use a national muni funds instead. It is likely that FCTFX will regain somewhat in the near term, but where to invest is hard to answer. I personally like to use balanced/asset allocation funds, and you are already have few solid funds - VWINX, BERIX.

    As for the rest of your bond funds, only OSTIX and PPHYX invested in short term bonds while the rest are of intermediate duration of 5 years or so. In the longer term, rates are likely to be higher than today. Hence the bond return will face considerable headwind in delivery the traditional return.
Sign In or Register to comment.