Schwab® Monthly Income Flexible Payout Overview
Schwab® Monthly Income Flexible Payout (SWKRX) is an actively managed Allocation Moderately Conservative Allocation fund. Schwab Funds launched the fund in 2008.
The investment seeks to provide current income and, as a secondary investment objective, capital appreciation. The fund invests primarily in a combination of Schwab Funds® and Schwab® ETFs in accordance with its target asset allocation. Its target asset allocation is not fixed, and the fund has the flexibility to move within the following asset allocation ranges at the discretion of the investment adviser: 30-70% equity; 30-70% fixed income; and 0-12% cash and cash equivalents. The fund is designed to offer shareholders an annual payout of 4-6% during most market environments.
About Schwab® Monthly Income Flexible Payout (SWKRX)
There are 3 members of the management team with an average tenure of 6.48 years: Zifan Tang (2012), Patrick Kwok (2019), Drew Hayes (2022). Management tenure is more important for actively managed funds than passive index funds.
The fund has 1 primary benchmark: S&P 500 TR USD index with a weighting of 100%. Schwab® Monthly Income Flexible Payout has 11 securities in its portfolio. The top 10 holdings constitute 99.4% of the fund’s assets. The fund meets the SEC requirement of being classified as a diversified fund. The fund is not considered to have an ESG focus with its investment selection and management.
Schwab® Monthly Income Flexible Payout is part of the Allocation global asset class and is within the Allocation fund group. Schwab® Monthly Income Flexible Payout has 30.6% of its portfolio invested in foreign issues. The overall assets allocated to domestic stock is 25.9%. There is 23.6% allocated to foreign stock, and 3.0% is allocated to preferred stocks. The bond allocation as a percentage of total assets is 44.6% (37.6% domestic bond, 7.1% foreign bond and 0.6% convertible bond). Schwab® Monthly Income Flexible Payout has 1.7% of the portfolio in cash.
Assets Under Management
The fund has $61 million in total assets, which is below the $392 million average for the Moderately Conservative Allocation category. Normally, lower assets under management translates to higher average expense ratios, and greater total assets are desired. However, for some investment categories, such as small-cap investing, it may be difficult for the manager to fully employ the desired active strategy if assets grow too large or too quickly.
Schwab® Monthly Income Flexible Payout has a trailing dividend yield of 4.8%, which is above the 2.9% category average. The fund normally distributes its dividend income monthly and its capital gains annually.
It’s natural to seek the best-performing investments, but you must consider the relationship between risk and return and the impact of costs and taxes on your realized returns.
SWKRX Performance and Fees
The expense ratio measures how much of a fund’s assets are used for administrative expenses and operating expenses, including adviser fees and fees for the transfer agent and custodial services. The Schwab® Monthly Income Flexible Payout expense ratio is below average compared to funds in the Moderately Conservative Allocation category. Schwab® Monthly Income Flexible Payout has an expense ratio of 0.25%, which is 74% lower than its category average, making the fund expense ratio grade a A. While it is difficult to predict returns, it is known that high annual expense ratios reduce your rate of return, and excessive fees are difficult to overcome. Active management normally comes with higher expense ratios than passive index management. Certain investment categories such as small company and foreign also normally have higher expense ratios. It is best to compare fund expense ratios against the category averages for meaningful assessments.
High portfolio turnover can translate to higher expenses and lower aftertax returns. Schwab® Monthly Income Flexible Payout has a portfolio turnover rate of 7%, indicating that holds its assets around 0.1 years. By way of comparison, the average portfolio turnover is 38% for the Moderately Conservative Allocation category.
Recently, in the month of May 2024, Schwab® Monthly Income Flexible Payout returned 2.4%, which earned it a grade of C, as the Moderately Conservative Allocation category had an average return of 2.5%. The letter grades of A, B, C, D and F are based upon relative rankings within the investment category. A grade of A, for example, would indicate that the return is in the highest 20% for that time period compared to all funds in that category.
Schwab® Monthly Income Flexible Payout Grades
Year to date, the fund has returned 0.6%, 2.4 percentage points worse than the category, which translates into a grade of F. The fund has returned 8.8% over the past year (grade of F), -0.7% over the past three years (grade of F) and 2.8% per year over the past five years (grade of F) and 2.9% per year over the past 10 years (grade of F).
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