Schwab’s Income Select List was developed and is managed by the Charles Schwab Investment Advisory, Inc. (CSIA) experts and includes mutual funds that have met their rigorous criteria, including both quantitative and qualitative factors. All are no-load and no-transaction fee and are selected based on their ability to generate income in their respective asset classes. The list is designed to help you achieve income and growth. See here for latest update.

This plan could be also used by participants who are in Schwab Personal Choice Retirement Account (PCRA) either through self-directed 401K brokerage link or self-directed IRA accounts.

We use the funds in the list to construct a plan. Each fund has 90 days minimum holding periods which are to be obeyed to avoid the short term redemption fee charged by Schwab and fund companies. The plan Schwab Income Mutual Fund Select List  consists of 57 funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, REITs, Emerging Market Equity, Fixed Income.

Asset Class Ticker Name
DIVERSIFIED EMERGING MKTS LEMSX Laudus Mondrian Emerging Markets Select
Foreign Large Blend SICNX Schwab International Core Equity
LARGE VALUE SWDSX Schwab Dividend Equity
MID-CAP VALUE ACMVX American Century Mid Cap Value Inv
DIVERSIFIED EMERGING MKTS AEMGX Acadian Emerging Markets Instl
Foreign Large Value IVFAX Federated Intl Strategic Val Dividend A
LARGE VALUE PQIAX Principal Equity Income A
LARGE BLEND PRBLX Parnassus Equity Income – Inv
Muni National Interm SWNTX Schwab Tax-Free Bond
Inflation-Protected Bond ACITX American Century Infl-Adj Bond Inv
Intermediate-Term Bond BCOSX Baird Core Plus Bond Inv
Intermediate Government CPTNX American Century Government Bond Inv
Muni National Short FSHIX Federated Shrt-Interm Dur Muni Instl
Short-Term Bond FSTIX Federated Short-Term Income Instl
Muni National Interm MITFX BMO Intermediate Tax-Free Y
Intermediate-Term Bond MWTRX Metropolitan West Total Return Bond M
Muni National Long NOTEX Northern Tax-Exempt
WORLD BOND PFBDX PIMCO Foreign Bond (Unhedged) D
Multisector Bond PONDX PIMCO Income D
Intermediate-Term Bond PTTDX PIMCO Total Return D
Intermediate-Term Bond SAMFX RidgeWorth Total Return Bond I
High Yield Bond SAMHX RidgeWorth Seix High Yield I
ULTRASHORT BOND SIGVX RidgeWorth US Gov Sec Ultra-Short Bd I
High Yield Bond TIYRX TIAA-CREF High-Yield Retail
Muni National Interm TWTIX American Century IntermTrm Tx-Fr Bd Inv
LARGE GROWTH JENSX Jensen Quality Growth J
SHORT GOVERNMENT FIGTX Federated US Govt 2-5 Yr Instl
LARGE BLEND SWANX Schwab Core Equity Inv
LARGE GROWTH SWLSX Schwab Large-Cap Growth
LARGE VALUE CHDEX Cullen High Dividend Equity Retail
LARGE BLEND DGAGX Dreyfus Appreciation
Foreign Large Blend GIGAX Aberdeen Intl Equity A
REAL ESTATE LRIOX Lazard U.S. Realty Income Open
Mid-Cap Growth PARMX Parnassus Mid-Cap
WORLD BOND LIFNX Laudus Mondrian Intl Fixed Income
Intermediate Government SWGSX Schwab GNMA
Inflation-Protected Bond SWRSX Schwab Treasury Inflation Protected Secs
Emerging Markets Bond PEMDX PIMCO Emerging Markets Bond D
Intermediate-Term Bond PGBOX JPMorgan Core Bond A
Short-Term Bond PLDDX PIMCO Low Duration D
Intermediate-Term Bond DLTNX DoubleLine Total Return Bond N
REAL ESTATE RRRAX DWS RREEF Real Estate Securities A
SHORT GOVERNMENT FEUGX Federated Adjustable Rate Secs Instl
LARGE VALUE OIEIX JPMorgan Equity Income A
Foreign Large Value LIEFX Laudus Mondrian Intl Equity Select
Short-Term Bond MWLDX Metropolitan West Low Duration Bond M
Foreign Large Blend OAKIX Oakmark International I
WORLD STOCK JGVAX Perkins Global Value T
Retirement Income PORDX PIMCO Real Income 2029 D
SMALL BLEND RYTFX Royce Total Return Svc
Intermediate-Term Bond SWIIX Schwab Premier Income
Retirement Income SWKRX Schwab Monthly Income Enh Payout
Retirement Income SWLRX Schwab Monthly Income Max Payout
Retirement Income SWJRX Schwab Monthly Income Mod Payout
Emerging Markets Bond TGINX TCW Emerging Markets Income N
Global Real Estate TVRVX Third Avenue Real Estate Value Investor
LARGE BLEND TICRX TIAA-CREF Social Choice Eq Retail

 

Asset Class Number of funds
Balanced Fund 4
REITs 3
Fixed Income 29
Commodity 0
Foreign Equity 6
Emerging Market Equity 2
US Equity 13
Total 57

As of Sep 6, 2013, this plan investment choice is rated as above average based on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan’s available investment funds are . It has the following detailed ratings:

Diversification — Rated as great (97%)
Fund Quality — Rated as average (53%)
Portfolio Building — Rated as above average (82%)
Overall Rating: above average (78%)

The fund quality is on average. That is an area Schwab should be able to improve. The portfolios in this plan have been on average again. The SAA equal weight portfolio is hurt by its equal weighting over other asset classes such as emerging market stocks. 

The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies. For comparison purpose, we also include the moderate model portfolios of a typical 5 asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:

US Equity: SPY or VTI
Foreign Equity: EFA or VEU
REITs: IYR or VNQ or ICF
Emerging Market Equity: EEM or VWO
Fixed Income: AGG or BND
Performance chart (as of Sep 6, 2013)

Performance (as of Sep 6, 2013)

Portfolio Name 1 Week
Return
YTD
Return
1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
Schwab Income Mutual Fund Select List Tactical Asset Allocation Moderate 1.9% 5.6% 8.4% 143.8% 8.3% 109.1% 10.9% 118.9%
Schwab Income Mutual Fund Select List Strategic Asset Allocation – Equal Weight Moderate 1.1% 1.2% 4.3% 67.3% 6.1% 72.8% 5.7% 44.4%
Five Core Asset ETF Benchmark Tactical Asset Allocation Moderate 1.1% 4.0% 4.6% 64.0% 5.6% 64.7% 7.8% 73.7%
Five Core Asset ETF Benchmark Strategic Asset Allocation – Equal Weight Moderate 2.8% 3.0% 4.6% 56.6% 5.9% 47.1% 5.9% 29.6%

We believe Schwab should improve this list by including some other higher quality income funds.