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.
Schwab Income Mutual Fund Select List is an investment plan that consists of the 37 funds in the Income Mutual Fund Select List. These funds enable participants to gain exposure to 4 major assets: US Equity, Foreign Equity, REITs, Fixed Income. All funds are assumed to have 90 days minimum holding periods.
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.
The following shows the 37 mutual funds:
|LARGE GROWTH||SWLSX||Schwab Large-Cap Growth|
|LARGE BLEND||SWANX||Schwab Core Equity Inv|
|Foreign Large Blend||SICNX||Schwab International Core Equity Inst|
|LARGE VALUE||TWEIX||American Century Equity Income Inv|
|LARGE BLEND||TICRX||TIAA-CREF Social Choice Eq Retail|
|LARGE BLEND||PRBLX||Parnassus Equity Income – Inv|
|LARGE VALUE||PQIAX||Principal Equity Income A|
|MID-CAP BLEND||NMMCX||Northern Multi-Manager Mid Cap|
|Foreign Large Blend||LISOX||Lazard Intl Strategic Equity Open|
|LARGE GROWTH||JENSX||Jensen J|
|REAL ESTATE||CSRSX||Cohen & Steers Realty Shares|
|MID-CAP VALUE||ARDEX||Aston/River Road Dividend All Cap Val N|
|Foreign Large Value||AAIPX||American Beacon Intl Equity Inv|
|Muni National Interm||SWNTX||Schwab Tax-Free Bond|
|Intermediate-Term Bond||SWIIX||Schwab Premier Income Instl|
|Intermediate Government||SWGSX||Schwab GNMA|
|Muni National Interm||TWTIX||American Century Interm-T Tx-Fr Bd Inv|
|Emerging Markets Bond||TGINX||TCW Emerging Markets Income N|
|Muni National Interm||STTBX||RidgeWorth Investment Grade T/E Bond I|
|High Yield Bond||STHTX||RidgeWorth High Income I|
|ULTRASHORT BOND||SIGVX||RidgeWorth US Gov Sec Ultra-Short Bd I|
|Intermediate-Term Bond||SAMFX||RidgeWorth Total Return Bond I|
|Intermediate-Term Bond||PTTDX||PIMCO Total Return D|
|Multisector Bond||PONDX||PIMCO Income D|
|Intermediate-Term Bond||PGBOX||JPMorgan Core Bond A|
|WORLD BOND||PFODX||PIMCO Foreign Bond (USD-Hedged) D|
|Muni National Long||NOTEX||Northern Tax-Exempt|
|Intermediate-Term Bond||MWTRX||Metropolitan West Total Return Bond M|
|High Yield Bond||MWHYX||Metropolitan West High Yield Bond M|
|Intermediate-Term Bond||FTRFX||Federated Total Return Bond Instl Svc|
|Short-Term Bond||FSTIX||Federated Short-Term Income Instl|
|Muni Short||FSHIX||Federated Shrt-Interm Dur Muni Instl|
|SHORT GOVERNMENT||FIGTX||Federated US Govt 2-5 Yr Instl|
|Intermediate Government||CPTNX||American Century Government Bond Inv|
|Short-Term Bond||ACSNX||American Century Short Duration Inv|
|Muni National Long||ACLVX||American Century Long-Term Tax-Free Inv|
|Inflation-Protected Bond||ACITX||American Century Infl-Adj Bond Inv|
|Asset Class||Number of funds|
|Emerging Market Equity||0|
As of Feb 13, 2012, 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 above average (75%)
Fund Quality — Rated as average (52%)
Portfolio Building — Rated as above average (69%)
Overall Rating: above average (66%)
From the above, these funds form a solid plan. However, with Schwab’s expertise in mutual fund management, one would expect Schwab can improve the fund selection process to give its clients higher quality funds. At the moment, the fund quality of the plan is about average.
To properly construct portfolios that can be used for wealth preservation and growth, it is critical to diversify and respond market changes. MyPlanIQ offers two asset allocation strategies: strategic and tactical asset allocation strategies (SAA and TAA for participants in Schwab Income Mutual Fund Select List).
Strategic Asset Allocation is based on well known modern portfolio theory and its key features include: diversification, proper fund selection and periodically re-balancing.
Tactical Asset Allocation works on a diversified array of assets provided by funds in a plan and adjusts asset mixes based on market conditions such as asset price momentum utilized by TAA.
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 4 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
Fixed Income: AGG or BND
Performance chart (as of Feb 13, 2012)
Performance table (as of Feb 13, 2012)
|Portfolio Name||1Yr AR||1Yr Sharpe||3Yr AR||3Yr Sharpe||5Yr AR||5Yr Sharpe|
|Schwab Income Mutual Fund Select List Tactical Asset Allocation Moderate||-2%||-17%||13%||119%||7%||62%|
|Schwab Income Mutual Fund Select List Strategic Asset Allocation Moderate||-2%||-14%||15%||128%||2%||7%|
|Four Core Asset Index Funds REITs Tactical Asset Allocation Moderate||4%||40%||10%||86%||6%||53%|
|Four Core Asset Index Funds REITs Strategic Asset Allocation Moderate||2%||15%||17%||99%||3%||9%|
Currently Real Estate, US Equity and Emerging Market are doing well. US Equity and Real Estate available to Schwab Income Mutual Fund Select List participants.
The plan delivered higher return in the Tactical Asset Allocation portfolio but not in Strategic Asset Allocation portfolio, compared with a standard four core asset class plan. Schwab should look into this further to provide a better list of income mutual funds. Otherwise, investors can easily use ETFs to construct income producing portfolios such as those in Retirement Income ETFs without getting into mutual fund trouble such as minimum redemption fee and higher cost charged by mutual funds.
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.