Tag: US Market

U.S.-dollar-denominated investment-grade bond market and harnessing the market’s collective wisdom about the relative value of each bond by weighting bonds according to their market value. This is a sound approach because it promotes low turnover, limits credit risk, and is cost-effective, and because the market does a decent job pricing these bonds. The index weights its holdings by market value and is rebalanced monthly. This yields a conservative portfolio, which limits its return potential but also cuts downside risk and makes for a good complement to stock holdings.

Portfolio:

This portfolio mimics the contours of the taxable U.S. investment-grade bond market, engendering a conservative portfolio relative to the intermediate core bond category average. The fund typically courts a similar amount of interest-rate risk, but as of September 2021, its average effective duration of 6.7 years was slightly higher than the category average, which stood at 6.0 years. U.S. Treasuries account for approximately 39% of this fund’s assets, giving the portfolio its conservative bend. Agency MBS and corporate bonds account for about 27% and 26% of the fund’s total assets, respectively.

People:

Schwab’s passive fixed-income portfolio management team has consistently provided tight index tracking performance. Its thoughtful portfolio construction process and continued investment in technology have distinguished it from the pack. Schwab has a narrower, simpler fund lineup than some of its larger peers, so its fixed-income index management team is smaller. However, it makes efficient use of its resources and is well-equipped to deliver cost-efficient and high-fidelity index tracking for the strategies it manages.

Performance:

The fund’s performance during the trailing 10 years through August 2021 has not been spectacular. It lagged the category average by 29 basis points annually. Although it exhibited slightly less volatility, ultimately its risk-adjusted performance (as measured by Sharpe ratio) ranked just outside of the category’s middle third. The fund also held up much better than category peers during the novel coronavirus-driven sell-off.

(Source: Factsheet from www.schwabassetmanagement.com)

Price:

Analysts find it difficult to analyse expenses since it comes directly from the returns. The fees levied by the share class is under cheap quintile. Analysts expect that it would be able to generate positive alpha relative to its benchmark index.

(Source: Factsheet from www.schwabassetmanagement.com)        (Source: Morningstar)

About ETF:

Schwab U.S. Aggregate Bond ETF SCHZ boasts a low fee and conservative portfolio, traits that make it a great core bond holding. The fund tracks the Bloomberg Barclays U.S. Aggregate Bond Index, which includes investment-grade U.S.- dollar-denominated bonds with at least one year until maturity. The index weights bonds by market value, tilting the portfolio toward the largest and most liquid issues. This approach also harnesses the market’s collective wisdom about the relative value of each security, a prudent approach for the long term. That said, bond-issuing activity influences the composition of this portfolio. Approximately 70% of the fund’s assets carried a AAA credit rating as of September 2021, while the category average was 57%. The fund’s category-relative performance will largely hinge on the performance of credit risky bonds.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.