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Is Franklin Income Adviser (FRIAX) a Strong Mutual Fund Pick Right Now?

Allocation Balanced fund seekers may want to consider taking a look at Franklin Income Adviser (FRIAX). FRIAX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

FRIAX is one of many Zacks' Allocation Balanced mutual funds to pick from. Allocation Balanced funds seek to invest in a balance of asset types, like stocks, bonds, and cash, though including precious metals or commodities is not unusual; these funds are mostly categorized by their respective asset allocation. Investors utilize Allocation Balanced funds as a way to get a good start with diversified mutual funds, as well as for core holdings in a portfolio of funds.

History of Fund/Manager

Franklin Templeton is based in San Mateo, CA, and is the manager of FRIAX. The Franklin Income Adviser made its debut in August of 1948 and FRIAX has managed to accumulate roughly $11.09 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 4.24%, and is in the middle 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 7.06%, 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. The standard deviation of FRIAX over the past three years is 6.39% compared to the category average of 8.12%. The standard deviation of the fund over the past 5 years is 7.54% compared to the category average of 8.29%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In the most recent bear market, FRIAX lost 39.17% and underperformed comparable funds by 2.93%. This means that the fund could possibly be a worse choice than its peers during a down market environment.

Even still, the fund has a 5-year beta of 0.62, so investors should note that it is hypothetically less volatile than the market at large. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. The fund has produced a negative alpha over the past 5 years of -2.63, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, FRIAX is a no load fund. It has an expense ratio of 0.46% compared to the category average of 0.90%. From a cost perspective, FRIAX is actually cheaper than its peers.

While the minimum initial investment for the product is $0, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Franklin Income Adviser ( FRIAX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Franklin Income Adviser ( FRIAX ) looks like a somewhat average choice for investors right now.

Your research on the Allocation Balanced 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. 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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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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