If investors are looking at the Allocation Balanced fund category, Schwab Balanced Fund (SWOBX) could be a potential option. SWOBX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
The world of Zacks' Allocation Balanced funds is an area filled with options, such as SWOBX. These funds like to invest in a variety of asset types, finding a balance between stocks, bonds, cash, and sometimes even precious metals and commodities; they are mostly categorized by their respective asset allocation. For investors, Allocation Balanced funds can provide an entry point into diversified mutual funds, and present core holding options for a portfolio of funds.
History of Fund/Manager
Schwab Funds is based in San Francisco, CA, and is the manager of SWOBX. Schwab Balanced Fund made its debut in October of 1996, and since then, SWOBX has accumulated about $447 million in assets, per the most up-to-date date available. Zifan Tang is the fund's current manager and has held that role since February of 2012.
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 6.39%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 9.81%, 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 SWOBX over the past three years is 7.62% compared to the category average of -36.4%. The fund's standard deviation over the past 5 years is 7.6% compared to the category average of 0.04%. This makes the fund more volatile than its peers over the past half-decade.
Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. SWOBX lost 32.52% in the most recent bear market and outperformed its peer group by 14%. This makes the fund a possibly better choice than its peers during a sliding market environment.
Even still, the fund has a 5-year beta of 0.66, so investors should note that it is hypothetically less volatile than the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. The fund has produced a negative alpha over the past 5 years of -0.84, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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, SWOBX is a no load fund. It has an expense ratio of 0.56% compared to the category average of -32.51%. SWOBX is actually more expensive than its peers when you consider factors like cost.
Investors need to be aware that with this product, the minimum initial investment is $0; each subsequent investment has no minimum amount.
Overall, Schwab Balanced Fund ( SWOBX ) has a high Zacks Mutual Fund rank, strong performance, worse downside risk, and higher fees compared to its peers.
For additional information on this product, or to compare it to other mutual funds in the Allocation Balanced, make sure to go to www.zacks.com/funds/mutual-funds 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.