Morningstar Recommends Schwab YieldPlus Sell-Off

Carl Saiontz

By Carl Saiontz
Posted September 2, 2008


Since March 2008, the financial fraud lawyers at Saiontz & Kirk, P.A. have been reviewing potential Schwab YieldPlus arbitration claims for investors who lost over $10,000 of their initial investment in the ultrashort bond fund. While most shareholders withdrew any remaining investment months ago after they experienced losses in excess of 30%, there are still investors who are holding the shares. Last week, Morningstar analysts recommended that any remaining Schwab YieldPlus investors sell their shares, as it appears impossible for the fund to recover, even if the market does improve.

Schwab YieldPlus is a bond fund designed and sold to be a relatively low-risk investment alternative to cash or money market funds. It is an ultra-short bond fund, which promised high current income with minimum change in share price. However, as a result of fund managers’ decisions to place a large portion of the fund’s assets in risky mortgage backed securities, investors have seen dramatic losses that they were never properly told could be at risk.

Given the conservative investment objectives of the fund, it is not likely to reverse course and see substantial increases in shareprice. In addition, since most shareholders have withdrawn their money, the fund has essentially been liquidated already, which Morningstar indicates will likely make it impossible for the fund to recover.

Schwab YieldPlus (SWYPX) once had almost $14 billion in assets. As of the end of July 2008, the fund had lost over 95% of that value and was left with just over $500 million in assets.


For investors who have lost over $10,000 due to the Schwab YieldPlus collapse, they can seek recovery of their damages through a Schwab arbitration claim. Investors were not properly informed about the disproportionate investment in risky sub-prime mortgage securities, or the lack of diversity, which put their investment at risk.

Several Schwab YieldPlus class action lawsuits have already been filed, but individual investors may be in a better position to recover their losses through a FINRA arbitration claim. To speak with a Schwab YieldPlus lawyer and review your financial losses, request a free consultation and claim evaluation.

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