Last month we purchased Fidelity Limited Term Bond (FJRLX) in our model portfolio. Part of our strat...
Schwab's "Solid Choicequot; in Health
01/04/2017 7:00 am EST
When investing, a good rule is to not overreact to a single quarter or result. Instead, smart investors balance such short-term data points against the overall picture, including factors like risk levels and consistency over time, suggests Alyssa Lappen, contributing editor to The Complete Investor.
This dictum comes to mind in reviewing Schwab Health Care Fund (SWHFX). When we added it to our fund portfolio in May 2013, the fund was in the top 36 percent of its category and Morningstar rated it four stars and low risk.
Since then while maintaining its low-risk rating the fund has lost one star, presumably reflecting its average returns. However, countervailing positives keep the fund a solid choice in the health care field.
The fund is in the top 20 percent of its category for the 12 months ending November.
Its returns of 6.4 percent over the past three-year period, 8.6 percent for the past five-year period, and 6.5 percent for the past 10-year stretch are slightly below the category’s averages.
But the Schwab fund’s below-average risk profile compensates. Its managers take their capital preservation mandate seriously and generally outperform on that score.
And the expense ratio of 79 basis points is 40 percent below the average 1.3 percent for its peers.
The fund’s low-risk credentials reflect its heavy focus on larger-cap drug companies and below-average holdings in biotechs and smaller caps.
Socially conscious investors also will appreciate that even though the Schwab fund doesn’t have a specific mandate to invest in socially responsible companies, it ranks in the top 18 percent based on that criterion.
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