Author Topic: Strangeness in Fund that mimics US Bond Market (SWLBX)  (Read 1380 times)


  • 5 O'Clock Shadow
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Strangeness in Fund that mimics US Bond Market (SWLBX)
« on: October 17, 2015, 05:24:18 PM »
Hey gang,

I am trying to find a mutual fund that mimics the US Bond market.  I have Schwab, and so their Schwab Total Bond Market Fund (SWLBX) is the one I'm looking at.  When I compare it to the other funds that mimic this market (it's the blue line), the 1- and 5-year look fine:

However the longer term shows a dark, ugly secret:

Can someone who actually understands this stuff please try to explain this to me in simple terms?  It looks as if SWLBX never recovered from the 2008 crash; interestingly, it started going south months before the September 2008 crash unlike its buddies.  But otherwise, it has the same ups/downs as its buddies. 

1) Why couldn't it recover during 2008, when its buddies could?
2) Is it therefore more likely than its buddies not to recover from the next big market crash -- and so I should avoid it as a long-term bond market index fund?

Thanks for your help!


  • Pencil Stache
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Re: Strangeness in Fund that mimics US Bond Market (SWLBX)
« Reply #1 on: October 17, 2015, 07:19:18 PM »
As of August 31 2007, SWLBX was 70% invested in Mortgage Backed Securities (note 1). It looks like VBMFX was also invested in approximately the same (note 2). I haven't delved into these annual reports in great detail, but from what I can glean on Bogleheads (note 3), it was a massive one-time tracking error. The fund managers missed the mark when tracking the index, which happens all the time with every index fund, but hardly ever to that magnitude. You may be able to determine exactly what happened by looking up the quarterly EDGAR postings for SWLBX and comparing them to VBMFX for 2007 Q4 and 2008 Q1.

1:, page 41

2: page 12