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

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Having trouble finding an Allocation Balanced fund? Schwab Balanced Fund (SWOBX - Free Report) is a potential starting point. SWOBX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various 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

SWOBX is a part of the Schwab Funds family of funds, a company based out of San Francisco, CA. Schwab Balanced Fund made its debut in October of 1996, and since then, SWOBX has accumulated about $696.81 million in assets, per the most up-to-date date available. The fund is currently managed by a team of investment professionals.

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 8.03%, and is in the middle 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 2.67%, which places it in the middle third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

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. SWOBX's standard deviation over the past three years is 13.01% compared to the category average of 17%. The standard deviation of the fund over the past 5 years is 12.64% compared to the category average of -32%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

The fund has a 5-year beta of 0.68, 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 -3.29, which shows that managers in this portfolio find it difficult to pick 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 0.02% compared to the category average of 0%. 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.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, even with its comparatively similar performance, worse downside risk, and higher fees, Schwab Balanced Fund ( SWOBX ) has a high Zacks Mutual Fund rank, and therefore looks a good potential choice for investors right now.

For additional information on the Allocation Balanced area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into SWOBX too 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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