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Franklin Templeton (BEN) is one of the best-known investment firms, offering investors a wide range of investment opportunities, including hundreds of mutual funds, to help manage their wealth. Franklin Templeton mutual funds boast highly experienced management teams, disciplined investment approaches, and high marks from funds rating agencies.
Key Takeaways
- Established more than 70 years ago, Franklin Templeton Investments is a large asset management company.
- Known for its actively managed mutual funds, Franklin Templeton offers a wide variety of strategies across several asset classes.
- Four of Franklin Templeton’s best funds offer investors access to equities and bonds.
1. Franklin Mutual European Fund Class A (TEMIX)
- Assets Under Management (AUM): $859.87 million
- 5-year Annual Return (NAV): 8.25%
- Net Expense Ratio: 1.20%
The Franklin Mutual European Fund Class A seeks capital appreciation, with income as a secondary goal, by investing at least 63% of its net assets in the securities of European companies. It focuses primarily on undervalued equity securities and, to a lesser extent, distressed securities and merger arbitrage opportunities.
Because the fund purchases equity securities in foreign currencies, such as the euro and British pound, the fund’s returns are highly exposed to currency risk and may fluctuate due to changes in exchange rates.
The fund has exposure to stocks from the U.K. and Germany with about 20% and 11%, respectively, while just over 20% is allocated to France and almost 8.5%% to Switzerland.
Regarding sector allocation, below are the top five sectors with the highest portfolio weighting within the TEMIX:
- Capital Goods: 9.94%
- Energy; 8.77%
- Pharmaceuticals, Biotechnology & Life Sciences: 8.77%
- Banks: 8.06%
- Financial Services: 7.47%
Note that the TEMIX fund charges load fees of 5.50%Â for investment balances of less than $50,000 and it requires a minimum investment of $1,000.
2. Franklin Federal Tax-Free Income Fund (FRFTX)
- Assets Under Management (AUM): $8.75 billion
- 5-year Annual Return (NAV): 0.81%
- Net Expense Ratio: 1.18%
The Franklin Federal Tax-Free Income Fund Class C seeks to generate current income by investing in tax-exempt municipal bonds issued by U.S. municipalities. Because municipal bonds are exempt from federal taxes, this fund is most appropriate for investors in high tax brackets. The fund typically buys and holds municipal bonds until maturity, which results in a very low turnover ratio.
This makes the Franklin Federal Tax-Free Income Fund highly tax-efficient. Bonds issued by municipalities in Texas, Florida, and New York have the highest weights in the fund’s portfolio. Over 80%Â of the fund’s bonds are investment-grade.
The fund has an average duration of 7.14 years and a 30-day SEC yield of 2.92%. The FRFTX is one of the oldest Franklin funds and has been managed by the same fund manager since 1996. The fund has a minimum investment requirement of $1,000 and a 1% load.
There were 7,222 mutual funds operating in the U.S. in 2023.
3. Franklin Utilities Fund Class A (FKUQX)
- Assets Under Management (AUM): $6.72 billion
- 5-year Annual Return (NAV): 7.77%
- Net Expense Ratio: 0.81%
The Franklin Utilities Class A invests more than 99% of its assets in equity securities of firms that provide utility services, such as electricity, gas, and water. The fund charges a load fee of 3.75% and has a minimum investment requirement of $1,000.
4. Templeton Global Bond Fund Class A (TPINX)
- Assets Under Management (AUM): $3.75 billion
- 5-year Annual Return (NAV): -2.39%
- Net Expense Ratio: 0.97%
The Templeton Global Bond Fund Class A searches the world for investment opportunities in currencies, interest rates, and sovereign credit that can offer attractive potential returns and additional portfolio diversification.
Sovereign bonds issued by countries in Latin America have the largest weights in the fund’s portfolio, with 28.10% total allocation. Overall, bonds issued by Asia and Australia/New Zealand account for 24.73% and 13.31% respectively, and European countries account for 8.17% of the fund’s portfolio. The fund holds 10.22% of the portfolio in cash and cash equivalents. The fund’s average duration is 6.02 years, and SEC yield is 5.00%.
Michael Hasenstab has managed the Templeton Global Bond Fund since 2001, while Calvin Ho has co-managed the fund since 2008. The fund requires investors to contribute at least $1,000 and pay a 3.75% load.
How Are Mutual Funds Taxed?
The taxation of mutual funds depends entirely on the type of investments that funds hold in their portfolios. You are taxed on any distributions received from a mutual fund regardless of how they’re paid out, whether that’s in cash or as a reinvestment in the fund. You are also taxed on the sale of any shares of your fund(s).
What Are the Downsides of Investing in Mutual Funds?
Mutual funds are very popular investments because they pool money from multiple investors and invest it into different securities. But, they do come with certain drawbacks. Some mutual fund companies charge high expense ratios and service fees, making them an expensive investment. There is also a potential for loss, especially when you consider that mutual funds aren’t insured by the Federal Deposit Insurance Corporation (FDIC).
What Are Some of the Common Types of Mutual Funds?
Mutual funds come in many shapes and sizes. The most common types of funds include equity funds, bond funds, and money market funds. There are also hybrid funds, which blend two different asset classes together into a single mutual fund.
The Bottom Line
Mutual funds offer investors a great way to diversify their portfolios while investing in a single vehicle. The funds listed above are considered some of Franklin Templeton’s best offerings. These equity and bond funds have a low barrier to entry (a minimum initial investment of $1,000) and good returns. As with any type of investment, you should do your due diligence and research before putting your money into any vehicle. Talk to a financial expert if you’re unsure whether these investments (or any other) align with your goals and financial situation.