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If investors are looking at the Muni - Bonds fund category, Schwab California Tax-Free Bond Fund (SWCAX - Free Report) could be a potential option. SWCAX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
SWCAX is one of many Muni - Bonds funds to choose from. Muni - Bonds funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. These securities can be backed by taxes (revenue bonds), but others are known as "general obligation" and are not necessarily backed by a defined source. These bonds are especially attractive because of their inherent tax benefits.
History of Fund/Manager
SWCAX finds itself in the Schwab Funds family, based out of San Francisco, CA. Schwab California Tax-Free Bond Fund made its debut in February of 1992, and since then, SWCAX has accumulated about $523.06 million in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.
Performance
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 0.7%, and it sits in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 3.61%, 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. SWCAX's standard deviation over the past three years is 4.21% compared to the category average of 4.62%. The fund's standard deviation over the past 5 years is 4.63% compared to the category average of 4.65%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.
If you believe interest rates will rise, this is an important factor to look at. SWCAX has a modified duration of 6.21, which suggests that the fund will decline 6.21% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 4.66% means that a $10,000 investment should result in a yearly payout of $466.
A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks.
This fund has a beta of 0.48, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, SWCAX has a negative alpha of -0.78, which measures performance on a risk-adjusted basis.
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, SWCAX is a no load fund. It has an expense ratio of 0.38% compared to the category average of 0.55%. Looking at the fund from a cost perspective, SWCAX 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.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, Schwab California Tax-Free Bond Fund ( SWCAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a great potential choice for investors right now.
For additional information on the Muni - Bonds 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 SWCAX too for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.
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Is SWCAX a Strong Bond Fund Right Now?
If investors are looking at the Muni - Bonds fund category, Schwab California Tax-Free Bond Fund (SWCAX - Free Report) could be a potential option. SWCAX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
SWCAX is one of many Muni - Bonds funds to choose from. Muni - Bonds funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. These securities can be backed by taxes (revenue bonds), but others are known as "general obligation" and are not necessarily backed by a defined source. These bonds are especially attractive because of their inherent tax benefits.
History of Fund/Manager
SWCAX finds itself in the Schwab Funds family, based out of San Francisco, CA. Schwab California Tax-Free Bond Fund made its debut in February of 1992, and since then, SWCAX has accumulated about $523.06 million in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.
Performance
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 0.7%, and it sits in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 3.61%, 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. SWCAX's standard deviation over the past three years is 4.21% compared to the category average of 4.62%. The fund's standard deviation over the past 5 years is 4.63% compared to the category average of 4.65%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.
If you believe interest rates will rise, this is an important factor to look at. SWCAX has a modified duration of 6.21, which suggests that the fund will decline 6.21% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 4.66% means that a $10,000 investment should result in a yearly payout of $466.
A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks.
This fund has a beta of 0.48, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, SWCAX has a negative alpha of -0.78, which measures performance on a risk-adjusted basis.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, SWCAX is a no load fund. It has an expense ratio of 0.38% compared to the category average of 0.55%. Looking at the fund from a cost perspective, SWCAX 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.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, Schwab California Tax-Free Bond Fund ( SWCAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a great potential choice for investors right now.
For additional information on the Muni - Bonds 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 SWCAX too for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.