The Best Schwab Mutual Funds of May 2024

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If you want to invest your money in a potentially high-growth asset without having to pick individual stocks, mutual funds are a good option. A mutual fund offers exposure to a wide range of investments in a single asset by pooling money from many investors and putting it into various stocks, bonds and other holdings.

Read More: 5 Genius Things All Wealthy People Do With Their Money

Investors who buy shares in the fund receive part ownership of it. They also share income generated when investments rise in value – and losses should the fund go down in value.

One of the top names in the mutual fund industry is Charles Schwab, the Texas-based company that pioneered low-cost investing options nearly 50 years ago.

Overview of Charles Schwab

On its website, Charles Schwab calls mutual funds “the core” of many Schwab client portfolios. You can choose from nearly 17,000 mutual funds from 600-plus fund families when you get an account with Schwab, including over 4,000 with no loads and no transaction fees through Schwab’s Mutual Fund OneSourceservice. Schwab itself offers more than 100 of its own funds.

The company’s history dates to the early 1960s, when founder Charles Schwab and two other partners launched an investment advisory newsletter. 12 years later, the current company was formed as a discount brokerage in Sacramento, California. Today it has more than $1 trillion in assets under management and ranks as the third-largest provider of index mutual funds.

Top Charles Schwab Mutual Funds

Although Schwab offers more than 100 of its own funds, some stand out because of their low costs, high returns and appeal to investors. Here’s a look at the eight best Charles Schwab funds for May 2024.

1. Schwab S&P 500 Index Fund (SWPPX)

This popular Schwab mutual fund mirrors the performance of the S&P 500 index and features a mix of large-cap securities. It is a passively managed index fund that outperformed the category average during the prior one, three-, five-, 10- and 15-year periods. As of April 2024, about 13% of SWPPX’s portfolio was in its top two holdings — Apple and Microsoft — making it similar to the S&P 500 index itself.

2. Schwab U.S. Aggregate Bond Index Fund (SWAGX)

This is a passively managed and diversified bond fund that was launched about seven years ago. By investing in SWAGX, you get exposure to U.S. government, agency, mortgage-backed and corporate bonds, as well as smaller investments in cash, foreign and other investment company bonds. This is a good choice if you want to add balance to a stock-fund-heavy portfolio.

The SWAGX portfolio’s “average effective duration” is about six years. As Forbes noted, the average effective duration shows the expected price decline of a bond or bond fund when interest rates rise by 1%. If you invest in SWAGX, you can expect the fund to fall in value by about 6% for each 1% rise in interest rates.

3. Schwab Tax-Free Bond Fund (SWNTX)

Here’s another bond fund that works well for investors in a high tax bracket because income from SWNTX is exempt from federal tax. This is an actively managed fund whose managers buy and sell bonds throughout the year with the goal of preserving capital and generating the best investment-grade municipal bond returns.

SWNTX’s dividend yield is 3.20%, but for married joint filers in the 24% federal income tax bracket, the tax-free yield is equivalent to a taxable bond yield of 4.21%. The fund’s average duration is about six years.

4. Schwab Fundamental US Small Company Index Fund (SFSNX)

The Schwab Fundamental US Small Company Index Fund helps you diversify your holdings by focusing on smaller publicly traded companies. Its biggest investments are in the industrial, consumer discretionary and financial services sectors. According to Forbes, SFSNX has outperformed its Morningstar small-cap blend peer group’s average annual total return over the past three, five, 10 and 15 years. It boasts a dividend yield of 1.33%.

5. Schwab MarketTrack Balanced Portfolio (SWBGX)

Charles Schwab’s Balanced Portfolio fund provides another good way to diversify your portfolio in a comparatively safe asset. SWBGX is an asset allocation fund that holds stocks, bonds and real estate investment trusts, with stocks typically making up 50% to 70% of its holdings. The fund’s equity allocation is mainly in U.S. stocks, though it also holds international stocks.

Forbes call this fund ideal for the “minimalist investor” who only wants to invest in a single fund. It’s a passively managed “fund-of-funds” that owns 13 Schwab funds, which helps keep costs down. Its dividend yield is 2.12%

6. Schwab International Index Fund (SWISX)

This fund offers a diversified mix of about 800 international stocks. The top 10 holdings account for only about 15% of the entire portfolio. SWISX invests in the largest companies in 21 developed markets in Europe, Australia and Asia/Pacific. SWISX’s 3.13% dividend yield more than doubles the S&P 500’s 1.29% yield, which makes it an ideal choice if you want a low-cost and passively managed index portfolio.

7. Schwab Value Advantage Money Fund – Investor Shares (SWVXX)

SWVXX is a different kind of money market mutual fund because it invests in high-quality, short-term debt issued by the United States and foreign countries. It is also actively managed to help assure good credit ratings and high yields. The 7-day dividend yield is slightly above 5%. Just keep in mind that when market interest rates decline, so will this fund’s yield.

8. Schwab U.S. Large-Cap Growth Index Fund (SWLGX)

The Charles Schwab U.S. Large-Cap Growth Index Fundtracks the Russell 1000 Growth Index and is mainly composed of large-cap growth stocks from the technology, consumer discretionary and communication sectors. Its top holdings include a who’s who of high-profile stocks, including Microsoft, Apple, Nvidia, Amazon.com, Facebook parent Meta Platforms, Google parent Alphabet Inc. and Tesla.

What To Know About Mutual Fund Fees

If you are new to mutual fund investing, then you owe it to yourself to learn about the types of fees you might face. Here’s a brief overview:

• Operating expense ratio: This refers to the percentage of fund assets taken out every year to cover fund operating expenses. For example, if you have $10,000 in a mutual fund with a 0.50% expense ratio, you’re paying about $50 per year in expenses.
• Load: A mutual fund’s “load” is a one-time commission some fund companies charge whenever you buy or sell shares in certain load-based mutual funds. Loads are used to compensate the broker for the sale, but many fund companies (including Schwab) offer plenty of no-load options.
• Transaction fee: This is a trading fee imposed by some brokerages whenever you buy or sell mutual fund shares.  

Information is up-to-date as of April 29, 2024 and is subject to change.

Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.

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