Some of the best Charles Schwab mutual funds to buy.
A household name for nearly 50 years, Charles Schwab is not only a bank but also a discount broker that provides both retirement and investment accounts. The San Francisco-based investment company (ticker: SCHW) offers both equity and bond mutual funds that are actively managed or based on benchmark indexes. Schwab holds more than $420 billion in assets and is one of the largest providers of index mutual funds. The company does not require a minimum investment for its index mutual funds, which is an advantage for investors who are just starting to invest for retirement in an individual retirement account and opt to manage their retirement income. Here are a few recommended Schwab mutual funds for your retirement account.
Schwab Health Care Fund (SWHFX)
The Schwab Health Care Fund is a fund focused on the health care sector. Investing in a sector increases both risk and volatility but also adds diversification in a portfolio, says Stuart Michelson, a finance professor at Stetson University. The top holdings include a 9.8% stake in Johnson & Johnson (JNJ), followed by smaller stakes of 6.6% in Merck & Co. (MRK) and 6.2% in Pfizer (PFE). The fund has beaten the performance of a benchmark index, Dow Jones Global Health Care Index, for the past 10 years.The expense ratio is 0.8% and the fund generated 7.3% for its five-year return." The 0.8% expense ratio is low for a sector fund and the 10-year return is above average at 13.97%," he says.
Schwab Total Stock Market Index Fund (SWTSX)
Novice investors often turn to index, balanced or target-date funds to provide diversification and lower risk in their portfolio. Another option to capture the broader market is to invest in a total stock market fund that includes all of the stocks being traded on U.S. exchanges. The Schwab Total Stock Market Index Fund has a low expense ratio at 0.03% and a 10.3% five-year return. This fund tracks the return of the total stock market and has grown steadily over the past 10 years, Michelson says. "The fund should have no more risk than the market as a whole," he says. "The return has been excellent over the past five years and decade."
Schwab 1000 Index Fund (SNXFX)
The Schwab 1000 Index Fund invests in the top 1,000 stocks based on a company's market capitalization and can be considered as an option for a core holding in a retirement portfolio. This fund is considered a large-blend fund and generated steady growth over the past 10 years, Michelson says. "It should have no more risk than the market as a whole," he says. The fund has a 0.05% expense ratio and a five-year return of 10.2% and a 10-year return of 14.4%. "The expense ratio is very low and the return has been excellent for both the past five years and 10 years," he says.
Schwab International Core Equity Fund (SICNX)
The Schwab International Core Equity Fund is an actively managed fund that is focused on owning global stocks. The top holdings are Swiss companies Roche and Nestle along with German financial services firm Allianz. The fund provides broad exposure to the international equities market and its benchmark is the MSCI EAFE Index. The fund's 10-year return is 5.5%, outperforming the index, and the three-year return is 4% which fell below the index that returned 6.4%. The Schwab International Core Equity Fund is not only diversified but manages currency risk and has an efficient structure, says Michael Underhill, chief investment officer at Capital Innovations in Wisconsin.The fund carries an expense ratio of 0.86%.
Schwab Balanced Fund (SWOBX)
Another actively managed fund, the Schwab Balanced Fund holds a combination of both equity and bond funds. The fund's top holdings include other Schwab funds such as the Schwab U.S. Aggregate Bond Index Fund (SWAGX), Schwab Core Equity Fund (SWANX) and the Laudus U.S. Large Cap Growth Fund (LGILX). Its 10-year return is 8.4% is nearly the same as the three-year return at 8.3%. The portfolio managers include Zifan Tang who started in 2012 and Patrick Kwok who began co-managing the fund earlier this year. This balanced fund provides income and suits investors who want both diversification and a lower amount of volatility in returns. Its expense ratio is a reasonable 0.5%.
Schwab S&P 500 Index (SWPPX)
The S&P 500 index fund is one of the most popular benchmark indexes since it tracks the top 500 stocks by market capitalization. The index is often a core holding in many retirement portfolios. Out of the many S&P 500 tracking funds offered by retirement providers, this one is "among the cheapest and most accessible," says Morningstar analyst Adam McCullough in a report. The expense ratio is very low at 0.02%. Schwab's fund "is an excellent pick for market cap-weighted exposure to U.S. large-cap stocks" and its strategy includes a "powerful combination of broad diversification and [a] rock-bottom fee," he wrote. The fund's five-year return is 10.7% while the 10-year return is 13.1%.
Top Charles Schwab mutual funds for retirement:
-- Schwab Health Care Fund (SWHFX)
-- Schwab Total Stock Market Index Fund (SWTSX)
-- Schwab 1000 Index Fund (SNXFX)
-- Schwab International Core Equity Fund (SICNX)
-- Schwab Balanced Fund (SWOBX)
-- Schwab S&P 500 Index (SWPPX)
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