Municipal Bond Forum
California fund
Q
Over the past week, the NAV of my California municipal bond fund (FRCIX) has been going down. I am OK with the ups and downs and I recognize that I am in it for the income. However, is there anything specific going on this week causing the fund to drop so much?
A
James A. Klotz responds:
We know of no reason to be concerned about your Franklin California Bond Fund. Ironically, the factors that make municipal bonds attractive today are also responsible for the lower market values you are seeing on your fund. We mentioned some of these market conditions in our commentary, “What’s Up With My Market Values?”
Yes, you are correct, you invest in bonds for the income, not capital gains. Typically, however, we recommend purchasing individual bonds rather than bond funds. Individual bonds have a stated maturity date, at which time you are assured of a full return of principal.
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