Selecting the right mutual fund is crucial for both beginner and advanced investors, and there are specific characteristics that can make a particular fund company’s lineup more appealing.
One significant aspect is the breadth of the offering. A diverse range of options across various asset classes like stocks, bonds, real estate, commodities and money markets, in combination with different strategies such as actively managed funds and smart beta, can attract a wide range of investors.
Another critical factor is cost, particularly the expense ratio. A lower expense ratio means less drag on performance, which is crucial in a competitive environment where every basis point can impact returns. Fund managers who focus on keeping costs low can provide a more attractive option for investors mindful of their expenses.
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Accessibility is also key. While accumulating assets under management is important for a fund, making sure that new investors aren’t deterred by high minimum investment requirements and transaction fees is equally important. Funds that are accessible to a broad audience, regardless of their investment size, tend to be more appealing.
Charles Schwab Corp.’s (ticker: SCHW) mutual fund lineup excels in these areas, making it a prime choice for investors at all levels. The variety and depth of its funds, combined with competitive costs and accessibility, are complemented by a robust brokerage platform, offering a comprehensive solution for those looking to build a diversified portfolio.
“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 Mark Latham, director of content at SuperMoney.com.
Jim Penna, senior manager of retirement services at VectorVest, agrees with Latham, noting: “A factor that makes Schwab a top fund provider for me is the user-friendly platform they provide for researching, buying and managing funds.”
Here are seven of the best Charles Schwab mutual funds in 2024:
| Fund | Expense ratio |
| Schwab Total Stock Market Index Fund (SWTSX) | 0.03% |
| Schwab S&P 500 Index Fund (SWPPX) | 0.02% |
| Schwab International Index Fund (SWISX) | 0.06% |
| Schwab Fundamental Emerging Markets Large Company Index Fund (SFENX) | 0.39% |
| Schwab Global Real Estate Fund (SWASX) | 0.75% |
| Schwab U.S. Aggregate Bond Index Fund (SWAGX) | 0.04% |
| Schwab Short-Term Bond Index Fund (SWSBX) | 0.06% |
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. By tracking the Dow Jones U.S. Total Stock Market Index, SWTSX currently holds around 3,400 large-, mid- and small-cap domestic equities weighted by market capitalization, meaning that the larger a company is, the higher weighting it has.
Because its benchmark index is so broad, SWTSX manages to keep annual portfolio turnover very low at just 1.9%. This is a benefit for investors, as it reduces the number of taxable events incurred by the fund when it needs to buy and sell securities. Complementing the 0.03% expense ratio is a lack of minimum required investment amounts and a long track record dating back to June 1999.
Schwab S&P 500 Index Fund (SWPPX)
“As in any fund you may consider, there are certain characteristics to always look for, starting with expense ratios, and the Schwab index funds have a favorable expense for passive funds,” Penna says. “For example, SWPPX has an expense ratio of just 0.02%.” This puts the fund in the top ranks when it comes to affordability, working out to around $2 in annual fees for a $10,000 investment.
Compared to SWTSX, SWPPX is slightly less diversified. This fund tracks the S&P 500, which encompasses 500 large- and mid-cap stocks selected by a committee subject to minimum profitability requirements. It omits many of the mid- and small-cap stocks held by SWTSX. Still, because SWPPX is weighted by market cap, its top holdings resemble those of SWTSX.
Schwab International Index Fund (SWISX)
Investing in Schwab’s mutual funds doesn’t mean sticking to the U.S. markets only. The firm also provides a wide range of funds designed to track international markets. For example, SWISX holds stocks from the EAFE region, which stands for Europe, Australasia and the Far East. These are known as developed markets, and include countries like the U.K., Japan, Australia, Germany, France and more.
As a passively managed fund, SWISX tracks the MSCI EAFE index. Over the past 15 years, the fund has returned an annualized 7.8%. While this is lower than the performance of domestic equity funds, investors should think long term and remember that U.S. market outperformance is not guaranteed to persist. SWISX charges a 0.06% expense ratio, which is low for international equities.
Schwab Fundamental Emerging Markets Large Company Index Fund (SFENX)
To complete a global stock portfolio, investors can complement SWTSX and SWISX with SFENX. This mutual fund tracks emerging market equities via the MSCI EM Index, which comprises stocks hailing from countries undergoing rapid growth, commerce and industrialization. These include countries like Brazil, China, India, Mexico, Saudi Arabia and South Africa, to name a few.
Historically, SFENX has not posted the best performance, returning just 3.2% over the past 10 years. This came during a period of U.S. outperformance that saw emerging markets lag. However, a small allocation to emerging markets via SFENX may be prudent for investors prioritizing global diversification. That being said, this fund is significantly pricier, at a 0.39% expense ratio.
Schwab Global Real Estate Fund (SWASX)
Investors looking for exposure to real estate prices without buying a rental property or investing in individual real estate investment trusts, or REITs, can do so via SWASX. This fund actively selects a portfolio of about 120 REITs from around the world, with a 61% concentration in North American markets. However, it is costly, with a 0.75% expense ratio and 87% turnover.
Currently, the top holdings in SWASX’s portfolio are U.S.-listed REITs like Prologis Inc. (PLD), Equinix Inc. (EQIX), Public Storage (PSA) and Equity Residential Properties Trust (EQR). Over the past 15 years, the fund has returned an annualized 7.9%. Given the nature of its holdings, SWASX also has above-average income potential, currently paying out a 3.8% 30-day SEC yield.
Schwab U.S. Aggregate Bond Index Fund (SWAGX)
To lower volatility, investors often resort to high-quality bonds. Typically, this includes U.S.-government-issued Treasurys, mortgage-backed securities and investment-grade corporate bonds of various maturities. To access a complete package of these bonds within a single fund, investors can buy SWAGX, which tracks the benchmark Bloomberg U.S. Aggregate Bond Index.
SWAGX’s portfolio currently averages out to a six-year duration. All else being equal, a 100-basis-point increase in interest rates will cause the fund to lose around 6% in value. Conversely, a 100-basis-point decrease in rates will cause the fund to appreciate around the same amount. Currently, investors can expect a 4.2% 30-day SEC yield and a low 0.04% expense ratio.
Schwab Short-Term Bond Index Fund (SWSBX)
“What I like in the Schwab fund lineup today is SWSBX,” says Michael Wagner, co-founder and chief operating officer at Omnia Family Wealth. “We want to have a healthy allocation to short-term bonds and can access that using SWSBX.” Compared to SWAGX, this fund has much lower interest rate sensitivity, with a duration of 2.6 years. It also comes in at a fairly low expense ratio of 0.06%.
“While the yield curve is still inverted, we’re not comfortable going out long and locking in rates,” Wagner says. “If you’re still on the sidelines, you’re being paid nicely to wait right now.” Case in point, SWSBX is actually paying a higher 30-day SEC yield of 4.4% compared to SWAGX at 4.2%. This makes the fund a viable means to keep cash relatively safe while earning competitive yields.
[READ: 5 Great Fixed-Income Funds to Buy Now]
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7 of the Best Charles Schwab Mutual Funds originally appeared on usnews.com
Update 02/02/24: This story was published at an earlier date and has been updated with new information.
