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:

Asset Class Ticker Name
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
Balanced Fund 0
REITs 1
Fixed Income 24
Commodity 0
Foreign Equity 3
Emerging Market Equity 0
US Equity 9
Total 37

 

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.

Portfolio Discussions

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)

Schwab-Income-Mutual-Fund

Performance table (as of Feb 13, 2012)

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.

Disclosure:

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.

See also

Investment Management: Retirement Income ETFs Portfolios Review

 

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