7 Best Charles Schwab Mutual Funds Of December 2023 (2024)

Every diversified investment portfolioneeds exposure to the overall U.S. stock market, and the Schwab S&P 500 Index Fund delivers, at a very low cost. That 0.02% expense ratio is tough to beat, and the fund’s outperformance shows the benefit of putting more of your investment dollars into the market and fewer into management fees.

As the name implies, this top Schwab mutual fund mirrors the performance of the most popular measure of the U.S. stock market, the . This large-cap blend, passively managed index fund outperformed the category average during the prior three-, five- and 10-year periods.

Like the S&P 500 itself, roughly 14% of SWPPX’s portfolio is in its top two holdings, Apple (AAPL) and Microsoft (MSFT). Fund weightings by industries and individual stocks are nearly identical to the S&P 500’s. On the other hand, if you’re concerned about a lack of small caps among your holdings, then consider adding a small-cap equity fund to your portfolio. Our list includes one (see SFSNX below).

After years of near-zero interest rates, bond yields have been trending up recently. That makes the Schwab U.S. Aggregate Bond Index Fund an increasingly attractive bet, especially for investors focused on income.

SWAGX is a passively managed, intermediate-term, diversified bond fund. The nearly seven year old fund’s average annual return matches its Morningstar category’s over the past five years. With bonds climbing back to their historical yields, a fund like SWAGX is worth considering for all but the most aggressive portfolios.

The SWAGX portfolio’s average effective duration is about six years. “Duration” is not to be confused with “maturity.” Average effective duration shows the expected price decline of a bond or bond fund when interest rates rise by 1%. SWAGX shareholders can expect the fund to fall in value by about 6% for each 1% rise in interest rates.

This one Schwab fund offers exposure to U.S. government, agency, mortgage-backed and corporate bonds. There’s also a smattering of cash, foreign and other investment company bonds. If you want to add balance to a stock-fund-heavy portfolio, SWAGX is a sound, low-priced bond mutual fund to consider.

Are you in a higher tax bracket? If so, then you might benefit from income that’s exempt from federal tax. That what you’d get from the Schwab Tax-Free Bond Fund.

Unlike the majority of mutual funds on this list, SWNTX is actively managed. Its managers buy and sell bonds throughout the year, aiming to preserve capital and provide the best investment-grade municipal bond returns.

SWNTX’s dividend yield is 3.1%. For married joint filers in the 24% federal income tax bracket, that tax-free yield is equivalent to a taxable bond yield of 4.079%. The fund has an average effective duration of about six years.

Schwab Fundamental US Small Company Index Fund would boost your portfolio’s diversification by adding a fund that focuses on smaller public companies. The fund’s most prominent sectors—industrials, consumer discretionary and financial services—are additional diversifiers for any portfolio that favors popular growth-style holdings.

So far this year, SFSNX has outperformed its Morningstar small-cap blend peer group’s average total return. It is also outperforming those direct rivals as a group over the past one, three, five, 10 and 15 years.

Schwab MarketTrack Balanced Portfolio is an asset allocation fund, holding stocks, bonds and real estate investment trusts (REITs). Most of its equity allocation is in U.S. stocks, with a smaller portion in international stocks. SWBGX is ideal for the minimalist investor who wants their entire portfolio to consist of just one fund.

The fund typically has 50% to 70% of its shareholders’ money at work in stocks. It’s a fund-of-funds that currently owns 13 Schwab funds, which helps keep costs down. Still, SWBGX’s expense ratio is higher than many passively managed index funds’ due to the inclusion of international funds and funds that consider so-called fundamental factors in portfolio construction to avoid overweighting large, popular stocks.

We like this fund for diversifying your 401(k), if it’s offered there. SWBGX is also worth considering by cautious shareholders who want to control risk while seeking capital preservation and growth.

Schwab International Index Fund is a low-cost, diversified, passively managed index portfolio. It’s an ideal pick for the international equity portion of your portfolio.

And SWISX’s 2.43% dividend yield tops the S&P 500’s 1.38%, represented by SWPPX, which hugs that index.

SWISX includes a well-diversified selection of about 800 international stocks—the top ten holdings make up only about 15% of the portfolio. The fund invests in the largest companies in 21 developed markets in Europe, Australasia and the Far East.