Cornerstone Fund Strategy Performance - Using Schwab Funds

If you haven't already looked at the performance of the Fidelity funds, we suggest that you start there, since we included comments on those pages not found here (we hate to be redundant). As a general observation, the Schwab universe of funds performs much like the Fidelity universe. This is great to see, because it adds to our confidence that the strategy wasn't somehow due to lucky fund picks in the Fidelity universe.

We have more experience with the Fidelity funds and tend to find that Fidelity fund requirements are more consistent (e.g., almost every fund we include in the universe has a current minimum of $2,500). However, Schwab funds are a very valid alternative, and it's great to see the strategy work with this universe.

As with the Fidelity universe, the information below provides an overview of how the strategy performed for aggressive, moderate, and conservative investment portfolios. The exact same strategy rules were used for both the Fidelity and Schwab universes.

Figure 1. Strategy Performance with Schwab Funds

The following tables provide the percentages allocated to each asset class, and shows the performance of each asset class along with the portfolio. We like to show annualized returns in conjunction with volatility and maximum draw-downs that are experienced. By doing this, it's easy to remember that higher returns are usually associated with increased volatility. The final column, the sharpe ratio, takes both absolute performance and volatility into account. Higher Sharpe ratios are desirable.

Table 1. Aggressive Portfolio Performance Summary

Table 2. Moderate Portfolio Performance Summary

Table 3. Conservative Portfolio Performance Summary

Table 4. Year-By-Year Returns For Each Portfolio and the S&P 500

The performance information above displays information at the portfolio level, which is essentially a blend of our 3 primary asset classes (U.S. sector, International, and Bond funds). For more detail on how each asset class performed (graphs and yearly returns), please visit Performance->Schwab Asset Class Details for more detail.

From the table above, you can quickly see that the strategy has registered some impressive returns in comparison to the S&P 500. This is especially true as the markets started to shift away from the U.S. fortune 500 companies in the late 90's, and started to favor a more varied mix of asset classes (international, etc.).