The Schwab Large-Cap Growth Fund seeks long-term capital growth by investing primarily in large-cap stocks of U.S.–headquartered companies–generally those with market capitalizations of at least $5 billion. The Fund seeks to outperform the Russell 1000 Growth Index over the long term while maintaining a similar level of volatility.
When evaluating potential investment opportunities, the Fund generally looks for companies that have higher-than-average price/earnings or price/book ratios–which are often characteristics of companies with high growth potential. Other indicators of companies with strong growth potential include new products, technologies or other opportunities, or a strong industry or market position.
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Distinguishing Characteristics and Benefits
Driven by Schwab Equity Ratings®
The Fund uses Schwab Equity Ratings to aid its stock selection, which represents Schwab's objective point of view on the 12-month performance outlook for approximately 3,000 of the largest U.S.–headquartered stocks (by market capitalization) ranked by a scale of A through F. It employs a disciplined methodology that evaluates each stock on the basis of investment criteria from four broad categories: fundamentals, valuation, momentum and risk. Generally, the Fund seeks to invest in stocks that are rated A or B at the time of purchase, but may purchase C-rated stocks for purposes of sector diversification.
The Fund has a diversified portfolio that avoids concentration in certain sectors.
This is a convenient way to gain exposure to large-cap growth stocks.
Investment Management Process
The portfolio management team employs a multifactor approach to finding what it believes is the right blend of risk and reward, not only within each individual stock but also with regard to how such stocks fit together to satisfy the investment style and risk profile of the Fund. As such, Schwab Equity Ratings is just one component of stock evaluation; other essential factors also constitute the basis for portfolio construction and optimization. As an actively managed fund, the Schwab Large-Cap Growth Fund's allocations across sectors and specific holdings will often vary from its benchmark, seeking to capitalize from selected over- and under-weightings based on market and economic considerations.