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Is Schwab Small-Cap Index (SWSSX) a Strong Mutual Fund Pick Right Now?

Any investors who are searching for Index funds should take a look at Schwab Small-Cap Index (SWSSX). The fund does not have a Zacks Mutual Fund Rank, though we have been able to explore other metrics like performance, volatility, and cost.

History of Fund/Manager

Schwab Funds is responsible for SWSSX, and the company is based out of San Francisco, CA. The Schwab Small-Cap Index made its debut in May of 1997 and SWSSX has managed to accumulate roughly $6.05 billion in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. SWSSX has a 5-year annualized total return of 8.18% and it sits in the bottom third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3 -year annualized total return of -0.05%, which places it in the bottom third during this time-frame.

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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. The standard deviation of SWSSX over the past three years is 21.29% compared to the category average of 20.19%. The standard deviation of the fund over the past 5 years is 23.88% compared to the category average of 23.47%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

The fund has a 5-year beta of 1.15, so investors should note that it is hypothetically more volatile than the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. The fund has produced a negative alpha over the past 5 years of -6.81, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Investigating 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 principally on equities that are traded in the United States.

As of the last filing date, the mutual fund has 94.78% of its assets in stocks, and these companies have an average market capitalization of $2.72 billion. The fund has the heaviest exposure to the following market sectors:

  • Finance

  • Industrial Cyclical

  • Technology

  • Other

With turnover at about 10%, this fund is making fewer trades than the average comparable fund.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, SWSSX is a no load fund. It has an expense ratio of 0.04% compared to the category average of 1.01%. Looking at the fund from a cost perspective, SWSSX is actually cheaper than its peers.

This fund requires a minimum initial investment of $0, while there is no minimum for each subsequent investment.

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

Bottom Line

Don't stop here for your research on Index funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare SWSSX to its peers as well for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.

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