Charles Schwab's mutual funds can be used to build a low-cost, high-quality portfolio for almost any investor. Although Schwab is best known as a reputable online discount brokerage firm, the company also has a good selection of mutual funds ideal for the long-term investor.
Successful investors have strategies and carefully build portfolios based on them. You should have an investing strategy, goals and know your risk tolerance. Once you decide upon these elements, you can begin searching for and choosing the best Schwab mutual funds to include in your portfolio.
The Best Schwab Mutual Funds
To rate any funds as best, it's important to understand what would make them qualify as top-performing funds. A fund must meet an investor's strategic criteria, acceptable risk, and rate of return; past performance, fees, and overall costs are also important.
Past performance alone is not an indicator of future performance; market, economy, and issuer performance should be analyzed and monitored to ensure that a fund meets all of your goals.
Considerations for the top performers are longevity, diversity, fees, return on equity, price to earnings ratio, and the fund's beta. A fund's beta is a comparative volatility index, specifically the fund's volatility compared to the index's volatility. A beta of 1.0 demonstrates average volatility, while a beta of less than 1.0 is less volatile than the index, and more than 1.0 is more volatile. All of these funds have a beta of 1.0, which indicates an average amount of risk, compared to the indexes they track.
The design of this rating is to find long-term returns rather than short-term gains—they work well for a retirement portfolio or other long-term financial goals. These funds were all picked for their span of multiple industries and sectors, rounded strategies, and low fees, along with their 10-year and lifetime performances.
Schwab S&P 500 Index Fund (SWPPX)
The S&P 500 Index fund from Schwab was first offered in 1997. Currently, it consists of stocks from information technology, finance, and healthcare companies such as Microsoft, Amazon, Apple, Meta (formerly Facebook), Alphabet (formerly Google), Johnson & Johnson, and JP Morgan. Risk is mitigated (but not eliminated) by investing across multiple sectors through multiple companies.
There are other minor holdings from communication, industrial, energy, utilities, and other companies. This fund is very diversified—the holdings make up no more than 5.03% of the fund in any single company (Microsoft).
Its 10-year return is 16.55%, just below the S&P 500 Index itself—this follows along with the fund's goal of tracking the S&P 500 total returns. The five-year return is 16.86%, the price to earnings ratio is 24.34, and the return on equity is 23.33%. The expense ratio for the fund is 0.02% (per $10,000 investment), and its beta rests at 1.0. Over the fund's lifetime, it has returned 9.17%.
The average return for the stock market as a whole is around 10% per year.
This fund has the lowest expenses of the Schwab offerings (.02%) while offering average risk and one of the higher returns.
Schwab Total Stock Market Index Fund (SWTSX)
The Total Stock Market Index Fund is designed to track the performance of the entire U.S. stock market. Created in 1999, the fund has seen its share of market ups and downs, a testament to its resilience.
SWTSX concentrates more than one-quarter of its holdings in information technology—13.5% in healthcare, 12.3% in discretionary holdings and 11.86% in financials. Microsoft, Apple, Amazon, Meta, Berkshire Hathaway, and Alphabet are among the holdings that make up the highest number of assets in the fund.
The diversity of this fund again mitigates (but does not eliminate) the risk by investing across multiple sectors and industries. The majority of the holdings are invested in Microsoft, Apple, and Amazon (10.5% among the three).
This fund's 10-year return is 16.5%, just below the Dow Jones U.S. Total Stock Market Index. The rate of return for a five-year period is 16.7%, and the fund's lifetime rate of return is 7.98%. Its price-to-earnings ratio is 23.23, and its return on equity is 18.97%.
The expense ratio for the fund is .03% (per $10,000 investment) and offers an average amount of risk and a competitive rate of return.
Index funds generally mirror the performance of the index they track, but they don't always hold every stock listed on the index.
Schwab U.S. Broad Market ETF (SCHB)
One of the younger funds in this list, but still a performer, SCHB had its beginnings at the end of the Great Recession in 2009. It's designed to track the performance of the total return of the Dow Jones U.S. Broad Stock Market Index. Similar to the other funds listed, this fund is heavily invested in information technology, healthcare, and financial companies. Information technology makes up 27% of the holdings, and healthcare makes up 13.39 % of the fund.
This is also another fund made up of the giants—Microsoft, Apple, Amazon, Meta, Alphabet, Berkshire Hathaway, and JP Morgan.
The Schwab U.S. Broad Market ETF has an expense ratio of .03%, with a price-to-earnings ratio of 23.3 and a return of equity of 19.15%. The 10-year return for SCHB is 16.55%, the five-year return is 16.83%, and the fund has returned 15.02% over its lifetime.
Schwab Health Care Fund (SWHFX)
Slightly older than the rest of these funds, SWHFX mirrors the strength of some of its siblings. This fund is designed to search for long-term growth and is designed differently than other funds listed—healthcare and pharmaceutical companies are the entire focus of this fund.
Healthcare and pharmaceuticals make up 100% of the holdings—the largest proportion of holdings are in Johnson & Johnson, United Health, Pfizer, Merck & Company, Abbott Laboratories and Thermo Fisher Scientific Inc.
Over a 10-year period, SWHFX returned 15.47%. The five-year return is 12.25%, while it has generated 9.89% over its lifetime. It has a price-to-earnings ratio of 26.43 and a return on equity ratio of 18.3%.
This fund is slightly more expensive to administer than other funds in this list because it is not tracking an index. This requires it to be actively managed, which explains its expense ratio of 0.8%.
Charles Schwab provides many services in their quest to be the lowest cost investment service around.
Schwab U.S. Large-Cap Growth ETF (SCHG)
The Schwab U.S. Large-Cap Growth ETF is designed to track the Dow Jones U.S. Large-Capacity Total Stock Market Index. The holdings include Microsoft, Apple, Amazon, Meta, Alphabet, Visa, and United Health.
This fund follows the design of the other funds in that it has a majority of its holdings in information technology; however, in this fund, information technology holdings are much larger than others—46.43% belong to Microsoft, Apple, Amazon, Meta, and Alphabet. Communication services, consumer discretionary, and healthcare holdings make up a total of 43.36% of the fund.
SCHG has a notable lifetime performance of 18.04% and a 10-year return of 19.51%. It has a price-to-earnings ratio of 37.12 and a return on equity of 27.10%. Its expense ratio is 0.04%.
Investing With Schwab
If you'd like to look over the funds offered by Charles Schwab, they provide detailed information on their product finder page. You can click on the symbols provided and view fund summaries, charts, distributions, fund performance, and the portfolio. All the information provided in this article is viewable so that you can find funds that work for your needs and tolerances.
Schwab's do-it-yourself (DIY) investment page gives you the means to build portfolios, calculate saving for retirement or college, conduct research, or do much more. If DIY is not for you, they provide a robo-advisor to help you create a portfolio and get your investments up and running. If you are not comfortable with either of these options, you can still contact Charles Schwab and talk to a financial advisor.
Frequently Asked Questions (FAQs)
What fees are taken out of mutual funds at Schwab?
Expense fees and transaction fees are the two main fees you'll incur when investing in mutual funds through Charles Schwab. You can avoid transaction fees by investing in a mutual fund from the Schwab Mutual Fund OneSource Select List. These funds can be traded without transaction fees, while other mutual fund trades will cost you up to $49.95.
When do mutual funds trade at Schwab?
Mutual funds trade when the net asset value (NAV) is recalculated after market close (4 p.m. EST). Trades placed in the previous trading window will execute at that new NAV price. It may take up to four hours for that to happen, but you can expect the trade to take place before the end of the evening.
When do Schwab funds pay dividends?
Schwab funds that distribute dividends and earnings once per year do so in December (usually December 30). Other funds do quarterly distributions, which pay in March, June, September, and December. Money market and income funds that distribute monthly payments typically do so around the 15th or the end of the month. To learn more about distribution schedules, including payment dates and ex-dates for specific funds, check either the quarterly/annual distribution schedule or the monthly schedule.
The Balance does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal.