Is SWRSX a Strong Bond Fund Right Now?

If you're looking for a Government - Bonds: Misc fund category, then a possible option is Schwab Treasury Inflation Protected Security (SWRSX). SWRSX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.

Objective

SWRSX is one of many Government - Bonds: Misc funds to choose from. In their portfolios,Government - Bonds: Misc funds hold securities issued by the United States' federal government, which are often seen as risk-free assets and described as extremely low-risk from a default perspective. While a mixed approach usually results in a medium yield and risk profile, this fund category focuses across the curve, meaning the yields and interest rate sensitivity will vary.

History of Fund/Manager

SWRSX is a part of the Schwab Funds family of funds, a company based out of San Francisco, CA. Schwab Treasury Inflation Protected Security debuted in March of 2006. Since then, SWRSX has accumulated assets of about $3.13 billion, according to the most recently available information. Matthew Hastings is the fund's current manager and has held that role since March of 2006.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 1.15%, and it sits 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 3.95%, which places it in the middle 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. SWRSX's standard deviation over the past three years is 4.36% compared to the category average of 4.17%. The standard deviation of the fund over the past 5 years is 6.03% compared to the category average of 6.26%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.

If you believe interest rates will rise, this is an important factor to look at. SWRSX has a modified duration of 6.4, which suggests that the fund will decline 6.4% for every hundred-basis-point increase in interest rates.

Income

We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 1.26% means that a $10,000 investment should result in a yearly payout of $126.

While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks.

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, SWRSX is a no load fund. It has an expense ratio of 0.05% compared to the category average of 0.53%. From a cost perspective, SWRSX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $0 and that 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

This could just be the start of your research on SWRSX in the Government - Bonds: Misc category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.

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This article originally published on Zacks Investment Research (zacks.com).

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