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Is ACTDX a Strong Bond Fund Right Now?

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If you have been looking for Muni - Bonds funds, a place to start could be Invesco High Yield Municipals Y (ACTDX). ACTDX carries 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 ACTDX 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

Invesco is responsible for ACTDX, and the company is based out of Kansas City, MO. Invesco High Yield Municipals Y debuted in March of 2006. Since then, ACTDX has accumulated assets of about $2.69 billion, 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 carries a 5-year annualized total return of 6.62%, 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 3.97%, 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, ACTDX's standard deviation comes in at 4.2%, compared to the category average of 7.14%. The fund's standard deviation over the past 5 years is 4.05% compared to the category average of 7.22%. 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. ACTDX has a modified duration of 8.47, which suggests that the fund will decline 8.47% 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. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 6.41% means that a $10,000 investment should result in a yearly payout of $641.

While a higher coupon is good for when you want a strong level of current income, it could present 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. ACTDX carries a beta of 1.24, meaning that the fund is more volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 2.35, 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, ACTDX has 25.3% in medium quality bonds, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 30.54%, giving ACTDX an average quality of BBB. This means that it focuses on medium quality securities.

However, it is worth noting that 35 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

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, ACTDX is a no load fund. It has an expense ratio of 0.60% compared to the category average of 0.86%. From a cost perspective, ACTDX is actually cheaper than its peers.

This fund requires a minimum initial investment of $1,000, and each subsequent investment should be at least $50.

Bottom Line

Overall, Invesco High Yield Municipals Y ( ACTDX ) 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.

Want even more information about ACTDX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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