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. 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)
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%. 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. 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.
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. 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%.
Schwab U.S. Large-Cap Growth ETF (SCHG)
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. 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.
