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Is Schwab Total Stock Market Index (SWTSX) a Strong Mutual Fund Pick Right Now?

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If you've been stuck searching for Large Cap Blend funds, consider Schwab Total Stock Market Index (SWTSX - Free Report) as a possibility. The fund does not have a Zacks Mutual Fund Rank, though we have been able to explore other metrics like performance, volatility, and cost.

Objective

SWTSX is part of the Large Cap Blend section, an area that boasts an array of many possible options. Large Cap Blend mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a 'buy and hold' mindset. Blended funds mix large, established companies into their holdings, which gives investors exposure to both value and growth at the same time.

History of Fund/Manager

Schwab Funds is responsible for SWTSX, and the company is based out of San Francisco, CA. Schwab Total Stock Market Index debuted in June of 1999. Since then, SWTSX has accumulated assets of about $45.01 billion, according to the most recently available information. The fund is currently managed by a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 12.56%, and is 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 22.32%, 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. Compared to the category average of 12.68%, the standard deviation of SWTSX over the past three years is 12.23%. The standard deviation of the fund over the past 5 years is 15.58% compared to the category average of 15.46%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 1.02, the fund is likely to be as volatile as 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. SWTSX's 5-year performance has produced a negative alpha of -1.26, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Exploring the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is principally on equities that are traded in the United States.

Currently, this mutual fund is holding 86.38% in stocks, with an average market capitalization of $507.98 billion. The fund has the heaviest exposure to the following market sectors:

  • Technology
  • Finance

With turnover at about 4%, this fund is making fewer trades than its comparable peers.

Expenses

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, SWTSX is a no load fund. It has an expense ratio of 0.03% compared to the category average of 0.71%. SWTSX is actually cheaper than its peers when you consider factors like cost.

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

For additional information on the Large Cap Blend 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 SWTSX too for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.

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