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If you have been looking for Muni - Bonds funds, a place to start could be Schwab California Tax-Free Bond Fund (SWCAX - Free Report) . SWCAX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We classify SWCAX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.
History of Fund/Manager
SWCAX is a part of the Schwab Funds family of funds, a company based out of San Francisco, CA. Schwab California Tax-Free Bond Fund debuted in February of 1992. Since then, SWCAX has accumulated assets of about $395 million, according to the most recently available information. Kenneth M. Salinger is the fund's current manager and has held that role since March of 2008.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 2.77%, and it sits in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 1.44%, which places it in the middle 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. Compared to the category average of 3.04%, the standard deviation of SWCAX over the past three years is 3.2%. Looking at the past 5 years, the fund's standard deviation is 2.92% compared to the category average of 2.97%. 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.
For those that believe interest rates will rise, this is an important factor to consider. SWCAX has a modified duration of 5.19, which suggests that the fund will decline 5.19% for every hundred-basis-point increase in interest rates.
Income
We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 4.63% means that a $10,000 investment should result in a yearly payout of $463.
If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond.
Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. This fund has a beta of 0.99, 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 -0.54, which measures performance on a risk-adjusted basis.
Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, SWCAX is a no load fund. It has an expense ratio of 0.49% compared to the category average of 0.86%. From a cost perspective, SWCAX is actually cheaper than its peers.
While the minimum initial investment for the product is $100, investors should also note that there is no minimum for each subsequent investment.
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, Schwab California Tax-Free Bond Fund ( SWCAX ) 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 you have been looking for Muni - Bonds funds, a place to start could be Schwab California Tax-Free Bond Fund (SWCAX - Free Report) . SWCAX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We classify SWCAX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.
History of Fund/Manager
SWCAX is a part of the Schwab Funds family of funds, a company based out of San Francisco, CA. Schwab California Tax-Free Bond Fund debuted in February of 1992. Since then, SWCAX has accumulated assets of about $395 million, according to the most recently available information. Kenneth M. Salinger is the fund's current manager and has held that role since March of 2008.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 2.77%, and it sits in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 1.44%, which places it in the middle 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. Compared to the category average of 3.04%, the standard deviation of SWCAX over the past three years is 3.2%. Looking at the past 5 years, the fund's standard deviation is 2.92% compared to the category average of 2.97%. 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.
For those that believe interest rates will rise, this is an important factor to consider. SWCAX has a modified duration of 5.19, which suggests that the fund will decline 5.19% for every hundred-basis-point increase in interest rates.
Income
We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 4.63% means that a $10,000 investment should result in a yearly payout of $463.
If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond.
Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. This fund has a beta of 0.99, 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 -0.54, which measures performance on a risk-adjusted basis.
Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, SWCAX is a no load fund. It has an expense ratio of 0.49% compared to the category average of 0.86%. From a cost perspective, SWCAX is actually cheaper than its peers.
While the minimum initial investment for the product is $100, investors should also note that there is no minimum for each subsequent investment.
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, Schwab California Tax-Free Bond Fund ( SWCAX ) 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.