Schwab Equity Ratings Performance Outlook
Schwab Equity Ratings are designed to help investors research individual equities.
Ratings are generally updated weekly. Schwab tracks the performance of all rated stocks. We present the performance (change in price, plus dividends, if any) of rated stocks, sorted by their rating on the start date.
Model performance calculations do not account for transaction and other costs, so a typical investor would likely not achieve the same results. This information is intended to show historical performance of Schwab Equity Ratings.
View the Schwab Equity Ratings Performance
Additional Schwab Equity Rating Performance Explanation
How is Performance calculated?
Schwab follows a straightforward approach to calculating historical performance. First, Schwab creates five cohorts (defined as those stocks that received the same A, B, C, D or F rating on the start date). Schwab calculates the total return for each stock in each A, B, C, D and F rating cohort by dividing the ending price plus dividends paid during the period, if any, by the starting price for a particular holding period, minus one. For example, the total return of a stock with a starting price of $20 and an ending price of $22.20, which paid a dividend of $1 during the period, would be 16% (=[$22.20 +$1] / $20). Returns are calculated based on the market closing prices on the Holding Period Start Date and the market closing prices on the Holding Period End Date. Start Dates and End Dates are the first trading day of the week (generally Mondays).
All stocks within a Schwab Equity Rating cohort are equal-weighted at the beginning of the performance calculation period, meaning each stock has the same value relative to any other stock. Performance is calculated assuming stocks are held for the entire holding period, unless the stock has stopped trading due to acquisition, financial distress, delisting by an exchange, or other similar circumstance. If the stock has stopped trading (for example, because the company was acquired by another firm), it is assumed the stock is assumed to have been liquidated on the close of its last trading day, without transaction costs. Proceeds, if any, are held as non-interest bearing cash. In instances in which a stock continues to trade but its stock symbol changes during a performance calculation period, the symbol reflected will be the stock's symbol as of the start of the applicable performance calculation period.
After individual stock returns are calculated, Schwab averages the total returns for all of the stocks within a cohort during that time period to find the average return.
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. For example, if you invest in a stock with a total return of 16% before commissions and you paid 0.25% in initial commission, your total return for that stock after commission would be 15.71% (= [$22.20 + $1] / $20.05). If you sell the stock, you will incur the cost of selling as well, so the net return would be 15.42%. The amount of the actual commissions and other fees you may pay will vary depending on, among other things, the number of shares you buy and the way you execute the trade (such as via schwab.com or through a Schwab Investment Consultant). A list of commission charges and other fees is available on request on by calling (877) 284-9817.
Since ratings are generally updated weekly, new performance numbers are also calculated on a weekly basis but may be presented less frequently. Fifty-two week time periods were selected for tracking performance because Schwab Equity Ratings are meant to identify those stocks that will most likely outperform or underperform the broader market over the next 12 months. Shorter time periods have also been included to demonstrate more recent performance. Over time, the model upon which ratings are based may be altered.
Details about Performance Comparison Benchmarks
For comparison purposes, Schwab has selected two benchmarks—the Dow Jones Total Stock Market Index and the Average Performance of Stocks Rated A-F. The Dow Jones Total Stock Market Index was selected as a benchmark because it is a widely published, broad-based index that tracks performance of all publicly traded, U.S.-headquartered stocks with readily available price data. The Average Performance of Stocks Rated A-F is the arithmetic mean return of all stocks with Schwab Equity Ratings for each performance period. This benchmark provides a comparison of the relative performance of each cohort against all stocks with Schwab Equity Ratings at the beginning of that time period.
There are three key differences between the Dow Jones Total Stock Market Index and the Average Performance of Stocks Rated A-F:
1. The number of stocks tracked—the Dow Jones Total Stock Market Index tracks over 6500 stocks versus approximately 3,000 rated stocks in the Average Performance of Stocks Rated A-F;
2. How stock returns are weighted—the Dow Jones Total Stock Market Index, like the S&P 500 Index, is market capitalization-weighted, giving larger companies more influence over the movement of the Index. The Average Performance of Stocks Rated A-F is compiled by giving all stocks equal weight at the beginning of the period; and...
3. How dividends are reinvested—the Dow Jones Total Stock Market Index reinvests dividends on the ex-dividend date back into the Index; whereas, the Average Performance of Stocks Rated A-F treats dividends as non-interest bearing cash for the remainder of the holding period. In other words, dividends for the latter are not reinvested.
