Schwab Introduces Target Funds to Help Simplify Retirement Planning
01 June 2005 - 12:00AM
PR Newswire (US)
Schwab Introduces Target Funds to Help Simplify Retirement Planning
Failure to Regularly Adjust Long-term Portfolios is a Common
Pitfall for Investors SAN FRANCISCO, May 31 /PRNewswire-FirstCall/
-- People who want to save for the future by investing in a mutual
fund linked to the date they intend to retire can now do so at
Charles Schwab & Co., Inc. Today, Charles Schwab Investment
Management announced its new Target Funds, a diversified set of
five professionally managed mutual funds designed to help investors
achieve their retirement goals. Each is a "fund of funds,"
investing in an underlying blend of equity and bond mutual funds
geared to a specific time frame. All are no-load funds, with no
additional layer of management fees charged by Schwab for its
services.* The Target Funds will invest in a combination of Schwab
and Laudus Funds with varying allocations based on retirement dates
ranging from 2010 to 2040. The Schwab Retirement Income Fund is
designed for clients who are in retirement and want current income
with some potential growth from equities. The new funds are in
subscription through June 30, 2005, commencing operations on July
1, 2005. During the subscription period, Schwab clients can invest
in the funds at an offering price of $10 per share. "Only 50% of
baby boomers are estimated to be accumulating enough to be able to
support their current standard of living during retirement
years(1)," said Evelyn Dilsaver, president of Charles Schwab
Investment Management. "Many don't have the time or expertise
needed to create a sound investment portfolio and successfully
nurture it over time. Our Target Funds are a one-step solution for
people who want to 'set it and forget it.' You choose a fund based
on your retirement date, and Schwab's fund managers oversee the
portfolios and keep them on track." (See end of press release for
regulation analyst certification and how to obtain important
required disclosures.) Allocation Strategy Developed by Schwab
Center for Investment Research Extensive research by Schwab's
Center for Investment Research (SCIR) has determined the optimal
diversification of funds by asset class, market capitalization and
international exposure as well as further diversification through
multiple management styles in each asset category. SCIR found that
at retirement, a moderate portfolio with about 60 percent in
stocks, 35 percent in bonds and 5 percent in cash offers the best
risk-return trade-off. The funds gradually decrease their equity
holdings and increase fixed-income holdings as investors approach
and enter retirement. For investors in retirement, the Schwab
Retirement Income Fund focuses on providing current income along
with equity-growth potential. The Schwab Difference Schwab Target
Funds will invest in Schwab-affiliated equity and bond funds,
according to the allocation strategy developed by SCIR. Assets in
each of the funds will be allocated among 10 different equity,
fixed income and money funds -- a smaller universe than most target
funds, which helps keep the fund focused while minimizing overlap.
The majority of the portfolios' domestic equity holdings will
consist of funds powered by Schwab Equity Ratings(R), the
methodology behind Schwab's industry-recognized equity model
portfolio. Domestic funds include the Schwab Core Equity, Dividend
Equity and Small-Cap Equity Funds (all powered by Schwab Equity
Ratings), as well as the Laudus Rosenberg U.S. Large Cap Growth and
U.S. Discovery Funds. International equity exposure will be
obtained through the Laudus Rosenberg International Small Cap Fund,
as well as the Laudus MarketMasters International Fund. The cash
and short-term portion of the portfolio will be largely invested in
Schwab's YieldPlus Fund, recently recognized by Lipper and
Morningstar in the ultrashort bond category. Investments in the
YieldPlus fund will seek to provide higher yield potential for the
portfolio, though with higher risk than a money market fund.
Longer-term fixed-income assets will be allocated to the Schwab
Total Bond Market Fund. Fees for the Target Funds will be based on
the select (or institutional) share class of each underlying fund,
providing investors with access to the lowest-price eligible share
class available at Schwab. Fund expenses are 98 basis points for
the Schwab Target 2040 Fund, gradually decreasing to 70 basis
points for the Schwab Retirement Income Fund as the funds become
more heavily invested in fixed-income. No additional layer of
management fees will apply*. Each of the five funds is available
for an initial investment minimum of $2,500 ($1,000 for retirement
accounts). Complement to Schwab Managed Retirement Trust Funds for
Retirement Plans The new Target Funds for retail investors follow
the successful launch of the Schwab Managed Retirement Trust
Funds(TM) in 2002, which are available to 401(k) participants
through Schwab Corporate Services. Unlike the new Target Funds,
which are comprised of Schwab Funds, these retirement plan funds
are collective trust funds sub-advised by independent money
managers. With the launch of the Target Funds, Schwab is making
available the same type of easy-to-manage retirement solution for
retirement plan and retail clients alike. Portfolio Management
Jeffrey Mortimer, senior vice president and chief investment
officer for equities at Charles Schwab Investment Management
(CSIM), is responsible for overall management of the funds.
Mortimer oversees Schwab's equity index funds and all Schwab funds
and separate accounts based upon Schwab Equity Ratings. He also
manages the Laudus MarketMasters group of funds. Kim Daifotis,
senior vice president and chief investment officer for fixed
income, is responsible for the bond and cash-equivalent assets of
the Target Funds. Daifotis oversees all fixed-income funds for
CSIM, including municipal, taxable and money market funds. About
Schwab Equity Ratings Schwab Equity Ratings provides an objective
and powerful assessment of approximately 3000 U.S. head-quartered
equities, more than any other firm. Stocks are assigned grades of
A, B, C, D, or F, reflecting performance potential over the next 12
months. Schwab's outlook is that "A"-rated stocks, on average, will
strongly outperform, and "F"-rated stocks, on average, will
strongly underperform the equities market over the next 12 months.
The ratings assess four broad categories: fundamentals, valuation,
momentum, and risk. They are updated each week to reflect new
financial data and other information. On average, Schwab Equity
Ratings A-rated stocks outperformed the Dow Jones Wilshire 5000
Composite Index in the 52-week period from May 3, 2004 through May
2, 2005. The average performance of all stocks rated A on May 3,
2004, through the 52 weeks up to May 2, 2005 was 16.36% compared to
a return of 6.60% during that period for the Index. The average
performance of all stocks rated F from May 3, 2004 through the 52
weeks up to May 2, 2005, was -14.15%. For more information on
Schwab Equity Ratings, including performance details, how
performance was calculated, comparison of performance to benchmarks
and limitations of model performance, visit
http://www.schwab.com/serperformance. About Charles Schwab
Investment Management Founded in 1991, Charles Schwab Investment
Management, Inc. (CSIM), an affiliate of Charles Schwab & Co.
Inc., is one of the nation's largest mutual fund companies with
$140 billion under management as of April 30, 2005. It is the
country's third -largest money market fund manager and
third-largest provider of retail index funds. In addition to
managing Schwab proprietary funds, CSIM provides oversight for the
institutional-style, sub-advised Laudus Fund family. In total, CSIM
manages 62 mutual funds, including 21 actively managed. About
Charles Schwab The Charles Schwab Corporation (NYSE / Nasdaq: SCH),
through its operating subsidiaries, provides securities brokerage
and financial services to individual investors and the independent
investment advisors who work with them. With over 7 million
individual investor accounts and more than $1 trillion in client
assets, The Charles Schwab Corporation is one of the nation's
largest financial services firms. Its subsidiary Charles Schwab
& Co., Inc. (member SIPC) provides a complete range of
investment services and products, including an extensive selection
of mutual funds; financial planning and investment advice;
retirement plans; referrals to independent fee-based investment
advisors; and custodial, operational and trading support for
independent fee-based investment advisors. Its subsidiary Charles
Schwab Bank (member FDIC) provides banking and mortgage services
and products. The corporation's other operating subsidiaries
include U.S. Trust Corporation (member FDIC) and CyberTrader(R),
Inc. (member SIPC). These companies' Web sites can be reached at
http://www.schwab.com/, http://www.schwabbank.com/,
http://www.ustrust.com/, and http://www.cybertrader.com/. * Funds
may incur third-party expenses (1) Source: Congressional Budget
Office Subscription orders must be received in good form by 4 p.m.
Eastern Time on March 18, 2005. Orders received after that time
will be invested at the next determined net asset value (NAV) after
receipt and acceptance of the order by Schwab. Sufficient assets
must be in your account by 9 a.m. Eastern time on March 17, 2005.
If you do not have sufficient assets to meet the minimum initial
investment requirement by this time, your order will be canceled.
You may reinstate your order by bringing a check to your local
Schwab branch by 4 p.m. Eastern Time on March 18, 2005. Share price
will fluctuate once operations commence on March 21, 2005.
Investors should consider carefully information contained in the
prospectus, including investment objectives, risks, charges and
expenses. You can request a prospectus by calling Schwab at 800
435-4000. Please read the prospectus carefully before investing
Investment value will fluctuate, and shares, when redeemed, may be
worth more or less than original cost. The Schwab Center for
Investment Research is a division of Charles Schwab & Co., Inc.
International investing involves special risks such as currency
fluctuation and political instability. Share prices of bond mutual
funds fluctuate with market conditions and generally fall with
rising interest rates. Schwab Equity Ratings Cohort Performance
Schwab creates five cohorts (defined as those stocks that received
the same A, B, C, D or F rating that week). Schwab calculates the
total return for each stock in each A, B, C, D and F rating cohort
assuming a 52 week holding period. All hypothetical buy and sell
trades were assumed to take place at the stock's closing price.
Transaction costs such as brokerage commissions, fees or other
expenses have not been deducted from the total return calculations.
Results would have been lower if such costs were deducted. Any
dividends incurred were treated as non-interest bearing cash and
not reinvested. The 52 week performance for each Cohort is
calculated as the equal weighted average of all the simple total
returns associated with each stock in that Cohort. The Dow Jones
Wilshire 5000 Composite index is a capitalization weighted index of
over 6500 stocks and treats dividends as reinvested. Performance of
a single stock or group of stocks within a Schwab Equity Ratings
model performance cohort can vary greatly from the performance of
that cohort. Investors would not likely be able to achieve the same
performance as that discussed for various reasons explained in
detail on schwab.com. Limitations of Model Performance: For all
model performance results, there are inherent limitations which
investors should understand. Unlike an actual performance record,
simulated results do not represent actual investment performance or
trading. Since the trades have not actually been executed, the
results may have under- or over-compensated for the impact, if any
of certain market factors, such as the effect of limited trading
liquidity. No representation is being made that any investor will
or is likely to achieve results similar to those shown. The results
presented reflect past performance and should not and cannot be
viewed as an indicator of future performance. The results shown are
not an indicator of the returns a Schwab client would have realized
or will realize in relying on Schwab Equity Ratings or any stock
list or model mentioned. Schwab Equity Ratings and the lists or
models mentioned are not personal recommendations for any
particular investor and do not take into account the financial,
investment or other objectives and may not be suitable for any
particular investor. Before buying, investors should consider
whether the investment is suitable for themselves and their
portfolio. Additionally, investors should consider any recent
market or company news. Stocks can be volatile and entail risk and
individual stocks may not be suitable for you. Indexes are
unmanaged, do not incur management fees and expenses and cannot be
invested in directly. (0005-8246) DATASOURCE: Charles Schwab
CONTACT: Sondra Harris of Charles Schwab, +1-415-636-3292, or Web
site: http://www.schwab.com/
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