The Schwab Self-Directed Brokerage Account Indicators An industry-leading benchmark on retirement plan participant investment activity within selfdirected brokerage accounts. Quarter Ending December 31, 2013 FOR INSTITUTIONAL PURPOSES ONLY. 2014 Charles Schwab & Co., Inc. (Member SIPC). All rights reserved. (1212-7835)
An industry-leading benchmark on retirement plan participant investment activity within self-directed brokerage accounts Table of Contents: December 31, 2013 Key Schwab Observations for Quarter Ending December 31, 2013 2 PCRA Participant Profile Information 3 PCRA Participants within Age Bands 4 Market Value Allocation - Asset Classes 5 Market Value Allocation - Equity Sectors 6 Market Value Allocation - 7 Net Asset Flow - Asset Classes 8 Net Asset Flow - All Investment Categories 9
The Schwab Self-Directed Brokerage Account Indicators Key Schwab Observations for the Fourth Quarter 2013: Asset Balance Summary The major market indexes continued their trend from the previous quarter by recording stellar returns in the fourth quarter as the S&P 500 posted its best year since 1997 with an annual return of 32.39% and 10.51% gain for the quarter. The positive gains for the quarter can be attributed to a couple of factors such as healthy payroll growth reported in October and November, followed by the Fed announcing a gradual tapering of asset purchases starting in January 2014 along with a commitment to keeping short term rates near 0%. For the quarter, participants were able to take advantage of the year end surge, as average account balances in the Schwab Personal Choice Retirement Account (Schwab PCRA) grew by 4.6% from the previous quarter to close out the year at $191k. Although participants were not as active as they were in the previous quarter with trading volumes decreasing by 2.2%. Investing Behavior and General Investing Characteristics Asset Allocation When compared to a year ago, participants held 3% less in Cash & Equivalents, while adding the same amount to their Equity exposure growing it to 39%. by a narrow margin continued to be the largest asset class allocation at 40% which represents a 1% increase from last year. Equities Considering that Exchange Traded (ETFs) and Information Technology equities represent almost half of all equity allocations, it should be no surprise that seven of the Top 10 Equity Holdings are represented by these sectors. All of the other equity sectors had moderate changes over the course of the year. In a complete reversal from last year participants reduced their Taxable Bond fund exposure by 5% dropping it to an overall allocation of 20% for the year. This was followed by a re-allocation into Large Cap and Small Cap both combining to capture 43% of all fund allocations. Asset Flows When compared to the previous quarter participants increased net asset flows into Equities by 12.2%, followed by an 8.2% decrease in, while both asset classes captured a combined 94% of all net asset flows. The top three sector concentrations of net asset flows for the quarter were Exchange Traded (up 21%), Large Cap Stock (up 9.9%) and International (up 9.1%). Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. The S&P 500 is an index of 500 widely traded stocks. It is not an investment product available for purchase. 2014 Charles Schwab & Co., Inc. (Member SIPC). All rights reserved. (0214-1159) Page 2
PCRA Participants Profile Information* - All Average Age* 49 Top 10 Equity Holdings % of Equity Assets Average PCRA Account Balance $191,969 APPLE INC 6.5% S P D R S&P 500 ETF TR 1.4% Average Positions (per Account) BERKSHIRE HATHAWAY B NEWCLASS 1.3% Equities 4.81 GENERAL ELECTRIC COMPANY 1.2% 3.00 VANGUARD TOTAL STOCK MKTSTK MK 1.1% Cash Investments 1.27 BANK OF AMERICA CORP 1.0% Fixed-Income 0.18 SCHW US BRD MKT ETF 1.0% Total 9.26 GOOGLE INC 1.0% POWERSHS QQQ TRUST SER 1 0.9% Average Trades in Quarter (per Account) SPDR GOLD TRUST 0.9% Equities 3.41 2.14 Top 10 Mutual Fund Holdings % of MF Assets Fixed-Income 0.03 SCHWAB S&P 500 INDEX FD 2.4% Total 5.58 SCHWAB TOTAL STOCK MKT 1.0% PIMCO TOTAL RETURN FUND CL D 1.0% Median Percent Invested* YACKTMAN FOCUSED SERVICE CL 0.9% PCRA 75.2% OAKMARK INTL FD CLASS I 0.9% Core Offering 24.8% PIMCO TOTAL RETURN FUND INSTL 0.9% OAKMARK EQUITY & INCOME FD CL 0.7% VANGUARD 500 INDEX FD 0.7% PIMCO INCM CL D 0.6% VANGUARD TOTAL STOCK MKT INDEX 0.6% Investors should consider carefully information contained in the prospectus, including investment objectives, risks, trading restrictions, charges and expenses. You can request a prospectus at www.schwab.com or by calling the Schwab Dedicated PCRA Call Center at 1-888-393- PCRA (7272). Please read the prospectus carefully before investing. Investment value will fluctuate, and shares, when redeemed, may be worth more or less than original cost. 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. Fixed-income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks, including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors. Page 3
PCRA Participants within Age Bands* - All As of December 31, 2013 December 31, 2013 60% 50% 51.55% 40% 30% 30.39% 20% 18.06% 10% 0% 20-39 40-49 50+ This chart illustrates the percent of PCRA participants within each age band. Page 4
Market Value Allocation - Asset Classes* - All (Year over Year) December 31, 2013 Cash Investments 19% As of December 31, 2013 Cash Investments 22% As of December 31, 2012 Equities 39% Equities 36% 40% Fixed Income 2% 39% Fixed Income 3% 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 Investments. Page 5
Market Value Allocation - Equity Sectors* - All (Year over Year) December 31, 2013 ETFs 31% As of December 31, 2013 Consumer Discretionary 9% Utilities 1% Consumer Staples 4% Energy 6% ETFs 29% As of December 31, 2012 Consumer Discretionary 7% Utilities 2% Consumer Staples 5% Energy 7% Financials 10% Financials 10% Information Technology 18% Industrials 7% 3% Materials 3% Health Care 6% Telecomm 2% Information Technology 17% 5% Materials 4% Health Care 6% Telecomm 2% Industrials 6% 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. Page 6
Market Value Allocation - * - All (Year over Year) December 31, 2013 As of December 31, 2013 As of December 31, 2012 Taxable Bond 20% Asset Allocation 12% Taxable Bond 25% Asset Allocation 12% Specialized 9% International 16% International 16% Specialized 9% Small Cap Stock 14% Large Cap Stock 29% Small Cap Stock 12% Large Cap Stock 26% 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 longterm mutual fund assets. Percentages are calculated as of month end. Page 7
Net Asset Flow - Asset Class* - All As of December 31, 2013 December 31, 2013 Equities 52.2% 41.7% Fixed Income 6.6% Money Market 0.2% Options -0.6% -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 December 31, 2013. 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. Page 8
Net Asset Flow - All Categories* - All As of December 31, 2013 December 31, 2013 Equities - Tele 0.20% Equities - Other Money Marke 0.20% MF - Large Cap Stock MF - Other 0.30% Equities - Utili MF 0.60% - International Equities - MF Mat - Small Cap 0.90% Stock Equities - Fina 1.00% Equities - Consumer Discretionary Equities - Con 1.10% Equities - Mut MF 1.60% - Taxable Bond Equities - Ene 2.60% Equities - Info Technology MF - Specializ 3.70% Equities - Hea Equities 4.90% - Industrials MF - Asset MF Al- Asset 4.90% Allocation Equities - Indu 5.00% Equities - Health Care Equities - Info 5.20% MF - Taxable 5.50% MF - Specialized Equities - Con 8.20% Equities - Energy MF - Small Ca 8.30% Equities - MF - Internatio 9.10% MF - Large Equities Ca - Consumer 9.90% Staples Equities - Oth 21.00% Equities - Financials 2.6% 1.6% 1.1% 1.0% 3.7% 5.5% 5.2% 5.0% 4.9% 4.9% 9.9% 9.1% 8.3% 8.2% 21.0% Equities - Materials 0.9% Equities - Utilities 0.6% MF - Other 0.3% Money Market 0.2% Equities - Telecomm Services 0.2% 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 December 31, 2013. 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. Page 9
Endnotes *Data for the Participant Profile and Age Band charts is based on the PCRA participant population (approximately 41,482 accounts) of only Schwab Retirement Plan Services, Inc. Data for all other charts is based on all PCRAs in Schwab s entire PCRA participant population that have an account balance between $5,000 and $2 million (approximately 175,351 accounts). All data contained herein is for information purposes only and may not be copied, assigned, transferred, disclosed, or utilized without the express written approval of Schwab. Data is gathered for these reports from what we believe to be reliable sources; however, Schwab does not guarantee the accuracy, timeliness or completeness of the information. Charles Schwab & Co., Inc. is a registered broker-dealer, offering the Schwab Personal Choice Retirement Account (PCRA), as well as other brokerage and custody services, to its customers. The Charles Schwab Corporation (Charles Schwab) provides services to retirement other benefit plans and participants as well as equity compensation plan services and other financial and retirement services to corporations and executives through its separate but affiliated companies and subsidiaries, Schwab Retirement Plan Services, Inc.; Schwab Retirement Plan Company; Charles Schwab Bank; and Charles Schwab & Co., Inc. Brokerage products and services are offered by Charles Schwab & Co., Inc. (Member SIPC). FOR INSTITUTIONAL PURPOSES ONLY. 2014 Charles Schwab & Co., Inc. (Member SIPC). All rights reserved. (1212-7835)