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

Having trouble finding a Small Cap Growth fund? Schwab Small-Cap Equity (SWSCX) is a possible starting point. SWSCX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

SWSCX is one of many different Small Cap Growth funds to choose from. Small Cap Growth mutual funds build portfolios around stocks with markets caps under $2 billion and large growth opportunities. Additionally, these portfolios typically highlight smaller companies in promising markets and industries.

History of Fund/Manager

Schwab Funds is based in San Francisco, CA, and is the manager of SWSCX. Schwab Small-Cap Equity made its debut in June of 2003, and since then, SWSCX has accumulated about $601 million in assets, per the most up-to-date date available. The fund's current manager, Jonas Svallin, has been in charge of the fund since August of 2012.

Performance

Of course, investors look for strong performance in funds. SWSCX has a 5-year annualized total return of 11.39% and is in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 10.93%, which places it in the middle third during this time-frame.

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 SWSCX over the past three years is 14.39% compared to the category average of 13.74%. The fund's standard deviation over the past 5 years is 13.78% compared to the category average of 13.75%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. In SWSCX's case, the fund lost 54.71% in the most recent bear market and outperformed its peer group by 1.58%. These results could imply that the fund is a better choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 1.1, so it is likely going to be 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 -2.25, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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 1.31%. From a cost perspective, SWSCX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $100 and that each subsequent investment has no minimum amount.

Bottom Line

Overall, Schwab Small-Cap Equity ( SWSCX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Schwab Small-Cap Equity ( SWSCX ) looks like a somewhat average choice for investors right now.

Don't stop here for your research on Small Cap Growth 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 SWSCX 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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