Is Schwab Balanced Fund (SWOBX) a Strong Mutual Fund Pick Right Now?

Any investors hoping to find an Allocation Balanced fund could think about starting with Schwab Balanced Fund (SWOBX). SWOBX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

SWOBX 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

Schwab Funds is based in San Francisco, CA, and is the manager of SWOBX. Schwab Balanced Fund debuted in October of 1996. Since then, SWOBX has accumulated assets of about $577 million, according to the most recently available information. Zifan Tang is the fund's current manager and has held that role since February of 2012.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 11.16%, and it sits 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 9.69%, 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 11.98% compared to the category average of 12.86%. Over the past 5 years, the standard deviation of the fund is 9.76% compared to the category average of 10.44%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 0.64, the fund is likely to be less volatile than the market average. 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. SWOBX's 5-year performance has produced a positive alpha of 0.01, which means managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

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, SWOBX is a no load fund. It has an expense ratio of 0.51% compared to the category average of 0.89%. From a cost perspective, SWOBX 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, Schwab Balanced Fund ( SWOBX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Schwab Balanced Fund ( SWOBX ) looks like a good potential 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. 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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