Is Schwab Small-Cap Equity (SWSCX) a Strong Mutual Fund Pick Right Now?

Any investors hoping to find a Small Cap Growth fund could think about starting with Schwab Small-Cap Equity (SWSCX). SWSCX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

SWSCX is part of the Small Cap Growth category, and this segment boasts an array of many other possible options. Small Cap Growth mutual funds usually focus their portfolios on stocks with large growth opportunities and a market cap of under $2 billion. These portfolios tend to feature small companies in up-and-coming industries and markets.

History of Fund/Manager

SWSCX finds itself in the Schwab Funds family, based out of San Francisco, CA. The Schwab Small-Cap Equity made its debut in June of 2003 and SWSCX has managed to accumulate roughly $677.77 million in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 9.72%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 14.05%, which places it in the top 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 18.01%, the standard deviation of SWSCX over the past three years is 18.58%. The standard deviation of the fund over the past 5 years is 18.87% compared to the category average of 18.98%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 1.03, which means it is hypothetically as volatile as the market at large. 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. Over the past 5 years, the fund has a negative alpha of -3.71. This means that 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 mostly on equities that are traded in the United States.

As of the last filing date, the mutual fund has 80.91% of its assets in stocks, with an average market capitalization of $5.03 billion. The fund has the heaviest exposure to the following market sectors:

• Technology
• Other
• Finance
• Industrial Cyclical
• Health

Turnover is about 108%, so those in charge of the fund make more trades per year than the comparable average.

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, SWSCX is a no load fund. It has an expense ratio of 1.09% compared to the category average of 0.99%. Looking at the fund from a cost perspective, SWSCX is actually more expensive than its peers.

Investors need to be aware that with this product, the minimum initial investment is $0; each subsequent investment has no minimum amount.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, Schwab Small-Cap Equity ( SWSCX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and higher fees, this fund looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Small Cap Growth, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.

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