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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/