7 of the Best Charles Schwab Mutual Funds

Mutual funds are a good way to add diversification to your portfolio.

Charles Schwab has been offering affordable mutual fund options to investors for more than 30 years. The company’s “product strategy is to meet the investor’s evolving needs,” says D.J. Tierney, senior portfolio strategist at Schwab. “Our lineup is straightforward with core investor products and solutions, which will be among the lowest-priced in the marketplace.” One of the best things Schwab funds have to offer investors is that their expense ratios are consistent. As Tierney says, “every single investor, regardless of the amount invested, gets the same load.” In other words, an investor who chooses to deposit $10 won’t get charged a premium versus one who invests $10 million. Not to mention, all of the funds included in this list have no minimum investment, so they offer easy entry for nearly any investor looking to build a diversified portfolio.

Schwab Fundamental U.S. Large Company Index Fund (ticker: SFLNX)

Ryan Jackson, a research analyst at Morningstar, says investors in SFLNX “must be patient.” Rather than maintaining a “steady march in front of the market,” Jackson continues, SFLNX “makes its bacon with short bursts of outperformance.” He gives the fund an analyst rating of silver. The fund also has a five-star rating from Morningstar. The difference between Morningstar’s analyst and star ratings is that the analyst rating looks toward the fund’s future performance, while the star rating focuses on the fund’s past performance. With $7.1 billion in assets under management, SFLNX attempts to track the total return of the Russell RAFI US Large Company Index. Tierney says that what makes this fund different from others in the space is that it doesn’t sort companies by market capitalization. “Instead, it looks at companies through a lens of fundamental measures, including revenue, income and payout to shareholders,” Jackson says. SFLNX is a passively managed fund with a 0.25% net expense ratio, meaning you’ll pay $25 per year for every $10,000 invested.

Schwab S&P 500 Index Fund (SWPPX)

According to Lan Anh Tran, associate analyst for passive strategies at Morningstar, SWPPX “is an inexpensive option for a diversified exposure to the U.S. equity market.” Tran goes on to say that “SWPPX is suitable for investors looking for a core large-cap equity holding.” And that’s not a surprising view. Closely tracking the S&P 500 index, which comprises 500 of the largest companies on U.S. exchanges, this passively managed fund has an overall four-star rating and a silver analyst rating from Morningstar. SWPPX has $68.8 billion in net assets. The fund charges a mere 0.02% annual fee.

Schwab Balanced Fund (SWOBX)

SWOBX is a basket fund that seeks a balance of growth and income via its mix of funds containing equities, debt securities and cash. The fund has seven holdings, five of which are other Schwab funds. The two non-Schwab funds are the Laudus U.S. Large Cap Growth Fund (LGILX) and the State Street Institutional U.S. Government Money Market Fund (GVMXX). SWOBX is the only actively managed fund included in this list. The fund maintains a bronze rating from Morningstar analysts and an overall four-star rating. With a net expense ratio of 0.5%, SWOBX is more expensive than the other Schwab funds included in this list. But it pays a 4.5% distribution yield.

Schwab 1000 Index Fund (SNXFX)

With a net expense ratio of 0.05%, SNXFX is one of the cheaper options for investors on this list of the best Charles Schwab mutual funds. SNXFX is a massive passively managed fund that holds $13.9 billion in total assets. And with its inception dating to April 1991, it’s the oldest fund on this list. The fund’s strategy is to match the Schwab 1000 Index’s total returns. The Schwab 1000 Index tracks the 1,000 largest stocks by market capitalization. SNXFX has silver and four-star ratings from Morningstar. Morningstar analyst Daniel Sotiroff notes that SNXFX has outperformed the average return in its category over the past 10 years.

Schwab Fundamental International Large Company Index Fund (SFNNX)

“A sound investment process and strong management team underpin” SFNXX, Morningstar analysts say. The fund is passively managed and tracks the Russell RAFI Developed ex-U.S. Large Company Index, in which all included companies must be domiciled in developed nations outside the U.S. In other words, this index is attempting to track the beta of different index strategies in major international markets. The team at Morningstar gives SFNNX a silver analyst rating and four stars. SFNNX has a net expense ratio of 0.25%.

Schwab U.S. Mid-Cap Index Fund (SWMCX)

The only Morningstar gold-rated fund included in this list, the passively managed SWMCX has accumulated about $890 million in assets under management in just over four years since inception. And with a net expense ratio of only 0.04%, it’s affordable. The fund has a four-star rating from Morningstar both overall and over the past three years. SWMCX invests 90% of its net assets in stocks included in the Russell Midcap Index. Over the past two years, the fund’s share price has gained 26.7%.

Schwab U.S. Large-Cap Growth Index Fund (SWLGX)

Like SWMCX, the passively managed fund was founded in December 2017. The fund has a silver analyst rating from Morningstar and a four-star overall rating. With almost $900 million in assets under management, the fund tries to track the total return of large-cap U.S. stocks. To this end, it tends to invest in high-growth stocks in the Russell 1000 Growth Index. The fund has a net expense ratio of only 0.035%. And since its inception, it’s beaten the S&P 500 by more than 30%. Ryan Jackson at Morningstar says that although “this fund can look somewhat concentrated at first blush … it’s well-diversified relative to its category peers.”

7 of the best Charles Schwab mutual funds:

— Schwab Fundamental U.S. Large Company Index Fund (SFLNX)

— Schwab S&P 500 Index Fund (SWPPX)

— Schwab Balanced Fund (SWOBX)

— Schwab 1000 Index Fund (SNXFX)

— Schwab Fundamental International Large Company Index Fund (SFNNX)

— Schwab U.S. Mid-Cap Index Fund (SWMCX)

— Schwab U.S. Large-Cap Growth Index Fund (SWLGX)

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