The Schwab Self-Directed Account Indicators. brokerage. Quarter Ending June 30, 2014

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1 The Schwab Self-Directed Brokerage Account Indicators An industry-leading benchmark on retirement plan participant investment activity within selfdirected brokerage accounts. Quarter Ending June 30, 2014 MEANT FOR INSTITUTIONAL AUDIENCES Charles Schwab & Co., Inc. ( Schwab ) Member SIPC. All rights reserved. ( )

2 The leading industry benchmark on participant investment activity within self-directed brokerage accounts for retirement plans Table of Contents: June 30, 2014 Key Schwab Observation for Quarter Ending June 30, 2014 PCRA Participant Profile Information 2 PCRA Participants within Age Bands 3 Market Value Allocation - Asset Classes 4 Market Value Allocation - Equity Sectors 5 Market Value Allocation - ETF Sectors 6 Market Value Allocation - Mutual 7 Net Asset Flow - Asset Classes 8 Net Asset Flow - All Investment Categories 9 Important Disclosures Charles Schwab & Co., Inc. Member SIPC/NYSE ( ) ( ) Page 1

3 The Schwab Self-Directed Brokerage Account Indicators Key Schwab Observations for the Second Quarter 2014: Participant Summary While equities remained dormant in the winter months they began to thaw in the spring posting gains for each of the three months during the second quarter. The S&P 500 delivered a positive 5.2% return for the quarter its sixth consecutive quarterly rise marking the longest streak of quarterly gains for the index since As a result participant account balances in the Schwab Personal Choice Retirement Account (PCRA) were up 3.3% from last quarter, with an average account balance of $201K. In connection to the strong returns of the market, participant trading volumes decreased by 15.8% while the number of their average positions were up 1.2% over last quarter. Apple (AAPL) stock remained the Top 10 Equity Holding in PCRA growing to 6.48% an increase of 13.68% from Q1. Investing Behavior and General Investing Characteristics Asset Allocation The largest holdings among asset classes were Mutual (41%) and Equities (28%); both account for 69% of all participant asset allocations. The biggest movement among asset classes was a 4% reduction in Cash & Equivalents, with a reallocation into Equities, Exchange Traded (ETFs) and Mutual when compared to a year ago. Equities Information Technology climbed 3% from the last year to 27%; this was followed by Financials at 14% and Consumer Discretionary at. All of the other equity sectors had minor changes for the year. Exchange-Traded (ETFs) Continuing their trend from last quarter participants shed 2% of their Commodity (6%) holdings and reallocated into Large Cap (30%) ETFs. For the quarter half of the Top 10 Equity Holdings were ETFs, with four of them being Large Cap ETFs. Mutual One noticeable trend with the positive market returns was a retreat in Taxable Bond by participants and a reallocation into Large Cap. This is also supported by the vast majority of the Top 10 Mutual Fund Holdings being Large Cap Stock as well. Asset Flows Compared to a year ago net asset flows in Equities were up by 3.6% totaling 51.7%, while Mutual dropped to 41.7%. The top three net asset flows by sector were ETFs at 21.1%, Taxable Bond at 13.9% and Information Technology equities at 11.3% Charles Schwab & Co., Inc. (Member SIPC). All rights reserved. ( )

4 PCRA Participants Profile Information - All Average Age* 49 Top 10 Equity Holdings** % of Equity Assets Average PCRA Account Balance $201,017 APPLE INC 6.48% S P D R S&P 500 ETF TR 1.38% Average Positions (per Account) BERKSHIRE HATHAWAY B NEWCLAS 1.30% Equities 5.06 FACEBOOK INC CLASS A 1.08% Mutual 2.98 VANGUARD TOTAL STOCK MKTSTK M 1.08% Cash & Equivalents 1.31 GENERAL ELECTRIC COMPANY 1.04% Fixed-Income 0.17 SCHW US BRD MKT ETF 0.99% Total 9.52 BANK OF AMERICA CORP 0.97% POWERSHS QQQ TRUST SER % Average Trades in Q2 (per Account) SPDR GOLD TRUST 0.88% Equities 3.22 Mutual 2.18 Top 10 Mutual Fund Holdings** % of MF Assets Fixed-Income 0.03 SCHWAB S&P 500 INDEX FD 2.46% Total 5.43 SCHWAB TOTAL STOCK MKT 1. OAKMARK INTL FD CLASS I 0.84% Median Percent Invested* PIMCO TOTAL RETURN FUND CL D 0.82% PCRA 72.1% AMG YACKTMAN FOCUSED FD SVC 0.78% Core Offering 28.0% PIMCO TOTAL RETURN FUND INSTL 0.74% PIMCO INCM CL D 0.70% OAKMARK EQUITY & INCOME FD CL 0.70% VANGUARD 500 INDEX FD 0.67% DODGE & COX INTL STOCK 0.65% *Data is based on SchwabPlan PCRA participants only (approximately 11,000 accounts). All other figures are based on Schwab s full PCRA participant population with a minimum balance of $5,000. **None of the information constitutes a recommendation by Schwab or a solicitation of an offer to buy or sell any securities. Prospectuses containing more information including management fees and expenses are available from Schwab. Please always read the prospectus carefully before investing or sending money. Small cap funds are subject to greater volatility than those in other asset categories. International investments are subject to additional risks such as currency fluctuation, political instability and the potential for illiquid markets. Since sector funds focus investments on companies involved in a particular sector, the funds may involve a greater degree of risk than an investment in other mutual funds with greater diversification. Figures are based on Schwab s full PCRA participant population with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). All data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information Charles Schwab & Co., Inc. Member SIPC/NYSE ( ) ( ) Page 2

5 PCRA Participants within Age Bands* - All As of June 30, 2014 June 30, % 50% 52.28% 40% 30% 29.76% 20% 17.96% 10% 0% *Data is based on SchwabPlan PCRA participants only (approximately 10,000 accounts). Figures are based on PCRA participants with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). All data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information Charles Schwab & Co., Inc. Member SIPC/NYSE ( ) ( ) Page 3

6 Market Value Allocation - Asset Classes - All (Year over Year) June 30, 2014 As of June 30, 2014 As of June 30, 2013 Cash & Equivalents 17% Equities 28% Cash & Equivalents 21% Equities 26% Mutual 41% Fixed Income 2% ETFs Mutual 40% ETFs 11% Fixed Income 2% This chart illustrates the percent of PCRA participant assets in each noted asset class as a percentage of total PCRA assets. Percentages are calculated as of month end. Money market mutual funds are classified under Cash & Equivalents. Figures are based on all PCRA participants with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). All data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information Charles Schwab & Co., Inc. Member SIPC/NYSE ( ) ( ) Page 4

7 Market Value Allocation - Equity Sectors - All (Year over Year) As of June 30, 2014 As of June 30, 2013 Information Technology 27% Consumer Discretionary Utilities 1% Consumer Staples 6% Information Technology 24% Consumer Discretionary Utilities 3% Consumer Staples 7% Mutual 3% Industrials 10% Telecomm 3% Health Care 10% Materials 4% Energy 10% Financials 14% Mutual 4% Industrials 10% Telecomm 3% Health Care 9% Materials 4% Financials 14% Energy 10% This chart illustrates the percent of PCRA participant assets in each equity sector, as classified by Standard & Poor s, as a percentage of total PCRA assets within equity securities. Percentages are calculated as of month end. Figures are based on all PCRA participants with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). Data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information Charles Schwab & Co., Inc. Member SIPC/NYSE ( ) ( ) Page 5

8 Market Value Allocation - Exchange Traded (ETF) Sectors* - All (Year over Year) June 30, 2014 As of June 30, 2014 As of June 2013 Sector 13% Small-Cap 7% Commodity 6% Domestic Fixed Income 11% Sector Small-Cap 6% Commodity 8% Domestic Fixed Income Other 9% Mid-Cap 6% Large Cap 30% International Equity 17% International Fixed Income 1% Other 11% Mid-Cap 6% Large Cap 28% International Equity 16% International Fixed Income 1% This chart illustrates the percent of PCRA participant assets in each ETF sector, as classified by Morningstar, as a percentage of total PCRA assets within ETF securities. Percentages are calculated as of month-end Charles Schwab & Co., Inc. Member SIPC/NYSE ( ) ( ) Page 6

9 Market Value Allocation - Mutual - All (Year over Year) June 30, 2014 As of June 30, 2014 As of June 30, 2013 Taxable Bond 19% Asset Allocation International 16% Taxable Bond 22% Asset Allocation International 16% Specialized 9% Specialized 9% Small Cap Stock 14% Large Cap Stock 30% Small Cap Stock 13% Large Cap Stock 28% This chart illustrates the percent of PCRA participant assets in each mutual fund category, as classified by Morningstar Inc., as a percentage of total PCRA long-term mutual fund assets. Percentages are calculated as of month end. Figures are based on all PCRA participants with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). Small cap funds are subject to greater volatility than those in other asset categories. International investments are subject to additional risks such as currency fluctuation, political instability and the potential for illiquid markets. Since sector funds focus investments on companies involved in a particular sector, the funds may involve a greater degree of risk than an investment in other mutual funds with greater diversification. All data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information Charles Schwab & Co., Inc. Member SIPC/NYSE ( ) ( ) Page 7

10 Net Asset Flow - Asset Class - All As of June 30, 2014 June 30, 2014 Equities 51.7% Mutual 41.7% Fixed Income 7.3% Money Market -0.2% Options -0.5% -10% 0% 10% 20% 30% 40% 50% 60% This chart illustrates the percent of total net flows within each asset class over the three month period ending June 30, Net flow percentages are calculated by adding the purchases and sales amounts within each respective asset class and dividing by the total net flows over the period. Figures are based on all PCRA participants with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). All data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information Charles Schwab & Co., Inc. Member SIPC/NYSE ( ) ( ) Page 8

11 Net Asset Flow - All Categories - All As of June 30, 2014 MF - Small Ca -1.10% Equities - Other Equities - Utili -0.20% MF - Taxable Bond Money Marke -0.20% MF - Tax Free Equities 0.30% - Info Technology MF - Other 0.30% MF - Large Cap Stock Equities - Tele 0.30% Equities - Con 0.50% MF - International Equities - Indu 2.20% Equities - Health Care Equities - Ene 2.70% Equities - Fina MF - Asset 4.00% Allocation Equities - Con 4.70% MF - Specialized MF - Specializ 4.90% MF - Equities Asset Al - Consumer 5.10% Discretionary Equities - Hea Equities 5.30% - Financials MF - Internatio 8.50% Equities - Energy MF - Large Ca 9.80% Equities - Info Equities 11.30% - Industrials MF - Taxable 13.90% Equities - Consumer Staples Equities - Oth 21.10% Equities - Telecomm Services 0.5% 0.3% 2.7% 2.2% 5.3% 5.1% 4.9% 4.7% 4.0% 8.5% 9.8% 11.3% 13.9% 21.1% MF - Other 0.3% MF - Tax Free Bond 0.3% Money Market Equities - Utilities MF - Small Cap Stock -1.1% -0.2% -0.2% -5% 0% 5% 10% 15% 20% 25% This chart illustrates the percent of total net flows within each investment category, as classified by Standard & Poor s and Morningstar Inc., over the three month period ending. Net flow percentages are calculated by adding the purchases and sales amounts within each respective investment category and dividing by the total net flows over the period. Figures are based on all PCRA participants with a minimum balance of $5,000 in their PCRA account (approximately 60,000 accounts). Small cap funds are subject to greater volatility than those in other asset categories. International investments are subject to additional risks such as currency fluctuation, political instability and the potential for illiquid markets. Since sector funds focus investments on companies involved in a particular sector, the funds may involve a greater degree of risk than an investment in other mutual funds with greater diversification. Data is for informational purposes only. Schwab does not guarantee the accuracy, timeliness or completeness of the information Charles Schwab & Co., Inc. Member SIPC/NYSE ( ) ( ) Page 9

12 Disclosures Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by calling Please read the prospectus carefully before investing. Money Market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fun seeds to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment returns will fluctuate and are subject to the market volatility, so that an investor s shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable directly with the ETF. Share are bought and sold at market price, which may be higher or lower than the net asset value (NAV) Charles Schwab & Co., Inc. Member SIPC/NYSE ( ) ( ) Page 10