There are thousands of companies listed on major stock exchanges such as NASDAQ and the NYSE. As an investor, picking the right stocks individually to invest in can be a challenge. If you’re new to investing, consider putting your money with index funds to build a better portfolio and earn bigger profits. Here is Benzinga's list of the best Schwab index funds.
Quick Look at the Best Schwab Index Funds:
What are Index Funds?
Index funds are actively managed funds that mirror the performance of market indices. A market index is a collective measure of a set of similar companies and their impact on the economy. Among the several market indices, Schwab 1000 Index, S&P 500 index and Dow Jones U.S. Select REIT Index are known throughout the world.
You cannot directly invest in market indices. However, you can invest in many leading companies with a single trade by buying or selling shares of index funds. Index funds hold assets in multiple companies that reflect the performance of market indices. These holdings can vary as per the guidelines of the index fund managers and are periodically regulated to maintain a positive return rate.
Charles Schwab has been an industry leader in indexing for over 25 years. It gives investors access to index funds and exchange-traded funds (ETFs) from different industry verticals and covers companies from various asset-classes. Schwab provides index funds with some of the lowest costs and highest year-to-date earnings.
For investors with limited time on their hands, researching individual companies and their financial history can be time-consuming. Index funds and ETFs from Schwab let you own shares of multiple companies without having to worry over their daily performance.
Best Schwab Index Funds Right Now
Schwab is the 3rd-largest provider of index mutual funds. The combined assets under management (AUM) of Schwab index funds and Schwab ETFs is $255.8 billion.
You can consider investing in these Schwab index funds and ETFs:
1. Schwab US Large-Cap ETF (NYSEARCA: SCHX)
Schwab US Large-Cap ETF has been on the market since 2009. It tracks the Dow Jones U.S. Large-Cap Total Stock Market Index and has holdings in 756 companies. This index fund focuses on companies from industrial sectors such as information technology, health care, consumer discretionary and financial services. Schwab US Large-Cap ETF consists of large-cap companies in North America that include Apple, Microsoft, Amazon.com, Facebook and Alphabet.
This ETF has an expense ratio of 0.03% and a P/E ratio of 21.84. It has a 52-week low of $43.02 and a 52-week high of $57.49. Schwab US Large-Cap ETF has high liquidity and an average daily share volume of over 4 million. It has over $26 billion in total net assets and an annual dividend yield of $2.26 per share. Currently, SCHX has a 1-year return rate of -14.18%, a 3-year return rate of 9.69% and a 5-year return rate of 11.79%.
2. Schwab International Equity ETF (NYSEARCA: SCHF)
Schwab International Equity ETF has been open to trade since 2009. It tracks the FTSE Developed ex US Index and has holdings in 1,522 companies. The index fund focuses on multinational companies from industrial sectors such as health care, consumer staples, information technology and communication services. Schwab International Equity ETF includes companies such as Nestle, Roche, Novartis and Samsung.
This ETF has an expense ratio of 0.06% and a P/E ratio of 12.95. It has a 52-week low of $30.90 and a 52-week high of $40.83. It is very liquid, trading an average of over $259 million daily and it paying a dividend yield of 2.95%. SCHF has a 1-year return of -19.8%, a 3-year return of 2.74% and a 5- year return of 2.45%.
3. Schwab US Broad Market ETF (NYSEARCA: SCHB)
Schwab US Broad Market ETF was launched in 2009. It tracks the Dow Jones U.S. Broad Stock Market Total Return Index and has holdings in 2,532 companies. The index fund focuses on companies from industrial sectors such as information technology, health care and financial services. Schwab US Broad Market ETF consists of North American companies such as Apple, Johnson & Johnson, Visa and JPMorgan Chase.
This ETF has an expense ratio of 0.03% and a P/E ratio of 22.50. It has a 52-week low of $42.61 and a 52-week high of $57.10. Schwab US Broad Market ETF has high liquidity and has an average daily share volume of over 3 million. It has AUM of $18.88 million and has an annual dividend yield of 1.41%. SCHB has a 1-year return rate of -14.98%, a 3-year return rate of 9.23% and a 5-year return rate of 9.81%.
4. Schwab US Dividend Equity ETF (NYSEARCA: SCHD)
Schwab US Dividend Equity ETF has been on the market since 2011. It tracks the Dow Jones U.S. Dividend 100™ Index and has holdings in 104 companies. The index fund focuses on companies from industrial sectors such as financial services, consumer staples and communication services. Schwab US Dividend Equity ETF consists of North American companies such as Blackrock, Qualcomm, 3M and Verizon.
This ETF has an expense ratio of 0.06% and has a P/E ratio of 14.99. It has a 52-week low of $69.86 and a 52-week high of $82.48. Schwab US Dividend Equity ETF has high liquidity and trades over 3.5 million shares per day. It has AUM of $34.19B and has an annual dividend yield of of 3.25%. SCHD has a 1-year return rate of -3.84%, a 3-year return rate of 13.87%and a 5-year return rate of 12.28%.
5. Schwab US TIPS ETF (NYSEARCA: SCHP)
Traders have been investing in Schwab US Tips ETF since 2010. It tracks the Bloomberg Barclays U.S. Treasury Inflation-Linked Bond Index and has holdings in 48 U.S. government securities.
This ETF has an expense ratio of 0.05%. It has a 52-week low of $55.37 and a 52-week high of $64.15. Schwab U.S. Tips ETF has high liquidity and trades more than 6.1 million shares per day. It has AUM of $15.43B and has an average annual yield to maturity of 2.42%. SCHP has a 1-year return rate of -4.11%, a 3-year return rate of 3.68% and a 5-year return rate of 3.30%.
Best Online Brokers for Index Funds
Take a look at some of the top online brokers on the market.
Interactive Brokers
- Best For:Active and Global TradersRating:Read Review
Interactive Brokers’ "fee waived" no transaction fee (NTF) program offers over 150 exchange-traded funds (ETFs) which reimburse IBKR Pro clients for commissions paid on ETF shares held for at least 30 days. IBKR Lite clients always pay $0 commissions on ETFs.
As a growing sector of the investment products universe, ETFs are well suited for implementing a variety of investment opportunities. They include investment themes covering equities, fixed income, and alternative strategies. Use ETFs to establish a core allocation, diversify existing portfolios, or implement new strategies. The Interactive Brokers platform also offers support for ETFs in options trading and short selling.
Advantages of Index Funds
Here’s a rundown of the pros of investing in index funds.
- Index funds are passively managed. Fund managers are regularly tracking the performance of the index funds.
- You can choose from hundreds of low-cost index funds and ETFs to invest in. Most index funds have expense ratios of less than 1% and trade free of commission.
- You can instantly diversify your portfolio by investing in index funds. ETFs and index funds constitute a broad range of multi-cap companies from different industrial verticals.
- Index funds do not actively execute buy and sell positions throughout the day and reduce capital gains. As a result, investing in index funds can be tax-efficient compared to other investments.
- Most index funds are highly liquid. Millions of index fund and ETF shares are traded every day.
Disadvantages of Index Funds
Here’s a rundown of the cons of investing in index funds.
- Market indices can move their positions rapidly during the day. Due to the frequent fluctuations in stock prices, the index funds may not track the market indices precisely in real-time.
- Index funds with high expense ratios can take a significant cut from your profits. Investors planning to buy-and-hold shares of index funds must consider recurring costs in the long run.
Schwab Index Funds can Strengthen your Portfolio
Schwab index funds enable you to own shares in hundreds of growing companies with ease and efficiency. Passively managed index funds from Schwab can also lower the risk of incurring losses from short-term market volatility. The low cost of investing in index funds has attracted new investors to earn better returns and secure a better financial future.
Frequently Asked Questions
Which Schwab index fund is the best?
Over the past year, the Schwab SCHD has managed to have the best performance despite the bear market.
Are index funds expensive?
Index funds are a low-cost entry to investing.
Are index funds a long-term investment?
Yes, index funds are considered long-term investments.