Best known for its robust online brokerage and popular exchange-traded funds, or ETFs, like the Schwab U.S. Dividend Equity ETF (ticker: SCHD), the Charles Schwab Corp. (SCHW) has long been a titan in the financial services and asset management industry.
However, Schwab also holds significant market share in the legacy mutual fund space. As one of the largest fund companies in the nation, Schwab currently offers over 50 products, many of which have no sales loads or transaction fees. Other investor-friendly advantages of Schwab mutual funds include a wide array of low-cost, passive index products, a low $100 minimum required investment for all equity and bond funds, and a single expense ratio for all investors in a fund, regardless of the amount invested.
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“What makes Charles Schwab stand out is their commitment to providing a diverse range of investment options to suit the needs of all types of investors,” says Andrew Latham, director of content at SuperMoney.com. “Additionally, their mutual funds have relatively low expense ratios compared to many other investment firms.”
Currently, Schwab’s mutual fund lineup spans seven broad categories: index, active equity, international, real estate, bond, monthly income and asset allocation. Most of these categories will have numerous picks investors can buy to slice and dice a portfolio strategy any way they choose.
Here’s a look at seven of the best Charles Schwab mutual funds available in 2023:
| Mutual fund | Expense ratio |
| Schwab Total Stock Market Index Fund (SWTSX) | 0.03% |
| Schwab S&P 500 Index Fund (SWPPX) | 0.02% |
| Schwab U.S. Aggregate Bond Index Fund (SWAGX) | 0.04% |
| Schwab Treasury Inflation Protected Securities Index Fund (SWRSX) | 0.05% |
| Schwab Large-Cap Growth Fund (SWLSX) | 0.99% |
| Schwab Global Real Estate Fund (SWASX) | 0.75% |
| Schwab Target 2060 Index Fund (SWYNX) | 0.08% |
Schwab Total Stock Market Index Fund (SWTSX)
“One Schwab fund that is worth considering is SWTSX, which offers broad exposure to the entire U.S. equity market and has a low expense ratio of 0.03%,” Latham says. Funds with high expense ratios can eat into long-term net returns. To mitigate this, a passively managed index fund like SWTSX may be ideal.
SWTSX is designed to provide investors with broad exposure to the overall U.S. stock market. By tracking the Dow Jones U.S. Total Stock Market Index, the fund provides exposure to over 3,500 large-, mid- and small-cap domestic stocks from all 11 market sectors. Thanks to its passive indexing strategy, SWTSX also manages to keep portfolio turnover minimal at just 2.2%, which is good for tax efficiency.
Schwab S&P 500 Index Fund (SWPPX)
For an even cheaper alternative to SWTSX, Schwab also offers SWPPX, which tracks the popular S&P 500 index for a 0.02% expense ratio. Compared to SWTSX, SWPPX tracks a smaller universe of companies, as it only holds around 500 stocks, omitting some 3,000 mid- and small-cap stocks followed by SWTSX but not captured by the S&P 500 index. This is because the S&P 500 is not intended to be a total market index.
Still, SWTSX and SWPPX have historically been similar in terms of overall performance. This is because the stocks held in SWPPX still dominate most of the holdings in SWTSX, as both funds are market cap-weighted, with large-cap stocks getting more representation. As such, investors can potentially use SWPPX as a viable tax-loss harvesting partner for SWTSX.
Schwab U.S. Aggregate Bond Index Fund (SWAGX)
For a mere 0.04% expense ratio, SWAGX offers exposure to over 8,500 U.S. government and investment-grade corporate bonds by tracking the Bloomberg U.S. Aggregate Bond Index. By combining SWAGX in various proportions with an equity fund like SWTSX or SWPPX, investors can adjust the riskiness of their portfolio depending on personal risk tolerance.
Aggregate bond funds like SWAGX have historically been vital for reducing volatility and drawdowns during periods of market turmoil. During market crashes and recessions, they may maintain their value better than equities. Still, these funds are not risk-free. When interest rates rise, as they have since 2022, even highly diversified bond funds like SWAGX may lose value.
[9 of the Best Bond ETFs to Buy in 2023]
Schwab Treasury Inflation Protected Securities Index Fund (SWRSX)
For investors looking for a hedge against inflation, Schwab offers SWRSX. This fund follows the Bloomberg U.S. Treasury Inflation-Linked Bond Index and carries a modest 0.05% expense ratio. SWRSX is distinctive in its focus, as it invests in Treasury inflation-protected securities, or TIPS, a type of U.S. Treasury bond designed to help investors maintain their purchasing power when inflation strikes.
Unlike traditional bonds, which pay a fixed interest rate on the bond’s face value, TIPS adjust in line with inflation, as measured by the Consumer Price Index, or CPI. If inflation rises, the principal value of TIPS will do so in lockstep, with the fixed interest rate of the bond now applying to a larger sum, and thus paying out a greater yield. Like normal Treasury bonds, TIPS also possess excellent credit quality.
Schwab Large-Cap Growth Fund (SWLSX)
“Some investors just want to track an index and be very passive in the market, such as those with a really long investment horizon,” says Anessa Custovic, chief investment officer at Cardinal Retirement Planning Inc. “But if you have a much shorter time horizon for your investment goals, you might want to think about an actively managed fund to manage risk or increase returns.”
For investors willing to pay higher fees to potentially beat the market, an actively managed fund like SWLSX could be the answer. This fund selects a portfolio of large-cap stocks screened for above-average growth potential based on three metrics: fundamentals, valuation and momentum. However, the fund charges a higher expense ratio of 0.99% due to the cost of active management.
Schwab Global Real Estate Fund (SWASX)
To further diversify a portfolio of stocks and bonds, investors can buy SWASX, which provides actively managed exposure to over 130 real estate investment trusts, or REITs, and other real estate companies. This approach can provide real estate exposure in an investment portfolio without buying a rental property and offer above-average income potential with a current 30-day SEC yield of 3.6%.
Like SWLSX, SWASX is actively managed. The fund screens REITs and real estate operating companies, or REOCs, on three metrics: fundamentals, valuation and sentiment. However, the use of active management gives this fund a relatively high expense ratio of 0.75%, along with high portfolio turnover of 80%.
Schwab Target 2060 Index Fund (SWYNX)
A hands-off fund for long-term investors is SWYNX, a target-date fund that provides a diversified portfolio in a single investment for a 0.08% expense ratio. This fund differentiates itself from the previous funds via a dynamic asset allocation strategy designed to evolve as the target retirement date of 2060 approaches.
Currently, SWYNX is composed of multiple other Schwab ETFs, tracking U.S. large-cap stocks, international developed and emerging market stocks, U.S. small-cap stocks, U.S. REITs, and U.S. aggregate bonds. As the years go by, SWYNX’s allocation will gradually shift to become more bond heavy to help decrease volatility and accommodate the lower risk tolerance of an older investor.
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7 of the Best Charles Schwab Mutual Funds originally appeared on usnews.com
Update 07/10/23: This story was previously published at an earlier date and has been updated with new information.
