Detailed Performance of Asset Classes - Schwab Funds

The illustrations below show how each asset class within the strategy performed when using the Schwab universe of funds. The same fund selection rules are used for selecting funds in each class. Given that these rules (same rules, parameter values, etc.) work across all three asset classes, we have added confidence that these rules are not just due to chance.

As with the Fidelity universe, let's first look at the U.S. sector asset class, and how well the strategy performed across these funds.

Schwab U.S. Sector Fund Strategy Performance

Figure 1. Strategy Performance with the Schwab U.S. Sector Funds

The following table provides key performance statistics for this asset class. Note that CAGR came in at 23.0%, while the asset class average came in at 11.1%. The volatility of the strategy was higher than the asset class as a whole (not surprising since we hold only 4 funds in this class).

Table 1. Schwab U.S. Sector Fund Performance Summary

The next table gives a year-by-year performance summary for the strategy as applied to this asset class, the asset class itself, and the S&P 500. Observe that the strategy beats the performance of the general asset class in most years. The great news here is that performance as compared to the asset class is very good. It's worth noting that the strategy should not be expected to out-perform the asset class every single year.

Table 2. Schwab U.S. Sector Fund Performance - Yearly Returns

Schwab International Fund Strategy Performance

The following illustration shows the performance of the international funds in our hypothetical back-test starting on 01/03/1995, We again see that the strategy generally performs better than it's asset class (international funds), which is exactly what we're seeking. Since the graph below is a semi-log graph, the performance gains may not seem that significant. However, in the table below, we see that this level of out-performance is nearly 8% on average each year - something we'd take any day!

Figure 2. Strategy Performance with the Schwab International Funds

Table 3. Schwab International Fund Performance Summary

Table 4. Schwab International Fund Performance - Yearly Returns

Schwab Bond Fund Strategy Performance

The following illustration shows the performance of the bond funds in our hypothetical back-test starting on 01/03/1995, For an investor starting off in 2000, bond funds turned out to be a much better investment than the S&P 500. Of course at the time, making this call was not nearly as easy! We see that the bond fund selections in the Schwab universe did not perform quite as well as in the Fidelity universe, but were still able to out-perform.

Figure 3. Strategy Performance with the Schwab Bond Funds

Table 5. Schwab Bond Fund Performance Summary

Table 6. Schwab Bond Fund Performance - Yearly Returns