The past couple of decades have seen investors increasingly look at the mutual funds on their right and the exchange-traded funds (ETFs) on their left, then quickly hang a Louie. And I can’t say I blame them. ETFs largely have mutual funds beat on several counts, including expenses, investment minimums, variety, and tax-efficiency.
And yet.
If one were considering investing in mutual funds, it’d be difficult to find a better provider than Schwab, whose products negate several of those concerns. Schwab is one of the largest mutual fund providers in the nation, giving it the scale to not only charge bargain-basement fees, but also let investors start buying its mutual funds for as little as $1—that’s even less than the price of one share it takes to buy an ETF.
Today, I want to introduce you to some of Schwab’s best mutual funds. This recently updated list (which includes a newly added fund) covers most of the core basics, as well as a few “satellite” strategies for investors looking to either play defense or go on the attack.
Editor’s Note: Tabular data presented in this article are up-to-date as of April 2, 2026.
Disclaimer: This article does not constitute individualized investment advice. Individual securities, funds, and/or other investments appear for your consideration and not as personalized investment recommendations. Act at your own discretion.
Table of Contents
Why Schwab Mutual Funds?
Charles Schwab is a U.S.-based brokerage and banking company founded in 1971 as a traditional brokerage company and then as a discount brokerage service in 1974. It’s the largest publicly traded investment services firm with more than $12 trillion in client assets.
It offers a wide range of financial services, such as investment advice and management, trading services, financial planning, banking services, workplace and individual retirement plans, annuities, and more. Indeed, many Americans use Schwab to invest; the company currently boasts 38.9 million brokerage accounts and another 5.8 million workplace plan participant accounts.
But today, I want to focus on its financial products.
Schwab is a low-cost leader that does provide some actively managed mutual funds but truly excels in its indexed strategies. Regardless of which way you lean, you can own Schwab’s funds for annual fees that are well below the industry average.
But where Schwab really stands out is nominal expenses—that is, how much money you’re actually forking out to purchase the funds. Many providers’ mutual funds set minimum initial investments in the thousands of dollars. But most Schwab mutual funds require a mere $1, which is convenient for everyone, and particularly ideal for investors who don’t have much capital to put to work.
In short: Schwab offers a variety of mutual funds, some of which are among the best on the market, and they won’t leave your wallet in tatters.
How Did We Select the Best Schwab Mutual Funds?
Schwab is different from other mega-sized fund providers in that it has a relatively constrained roster of just a few dozen mutual funds; thus, investors sorting through Schwab’s selections won’t have nearly as bad a case of analysis paralysis. Still, we’re better off paring the lineup down to an even more manageable list.
I start virtually every review of investment funds by booting up Morningstar Investor and running a quality screen I customize for each article. Here, I began my search by seeking out only Schwab mutual funds that have earned a Morningstar Medalist rating. Unlike Morningstar’s Star ratings, which are based upon past performance, Morningstar Medalist ratings are a forward-looking analytical view of a fund. Per Morningstar:
“For actively managed funds, the top three ratings of Gold, Silver, and Bronze all indicate that our analysts expect the rated investment vehicle to produce positive alpha relative to its Morningstar Category index over the long term, meaning a period of at least five years. For passive strategies, the same ratings indicate that we expect the fund to deliver alpha relative to its Morningstar Category index that is above the lesser of the category median or zero over the long term.”
As I’ve written in other Young and the Invested articles, a Medalist rating doesn’t mean Morningstar is necessarily bullish on the underlying asset class or categorization. It’s merely an expression of confidence in the fund compared to its peers.
From the remaining universe of funds, I selected a range of products that invest in various core assets—something to fill just about every basic portfolio need.
The Best Schwab Mutual Funds to Buy
Most of the best Schwab mutual funds on this list are of the indexed variety. That’s simply a reflection of the ratings—Schwab has a lot of very highly rated index funds, but only a few active products stand out in the Medalist ratings. But one result of this is that annual expenses across the group tend to be pretty low.
Also, every Schwab fund on this list has a minimum initial investment of just $1. That’s an enormous advantage. Providers with relatively low investment minimums still clock in around $500 or $1,000 to get started—but with Schwab, even if your liquidity is limited to a fistful of nickels, you have enough to get invested.
Now, let’s take a look at some great Schwab funds, some of which can serve as core portfolio investments, and some of which are better used as “satellite” positions to tailor your portfolio.
In no particular order …
1. Schwab S&P 500 Index Fund
- Style: U.S. large-cap stock
- Management: Index
- Assets under management: $125.2 billion
- Dividend yield: 1.2%
- Expense ratio: 0.02%, or 20¢ per year for every $1,000 invested
- Morningstar Medalist rating: Gold
The S&P 500 Index is tough to beat.
The index is frequently used as a performance benchmark for mutual funds that invest in U.S.-based large-cap stocks.* However, most fund managers who run these products typically struggle to top this benchmark over the long term, especially once fees are considered. According to 2025 year-end data from S&P Dow Jones Indices, the vast majority (86%) of active large-cap U.S. equity funds failed to beat the S&P 500 over the trailing 10-year period, and that number is almost 90% when looking at the past 15 years.
“I know guys that rate active managers in all these categories, and even they’re like, ‘I’m not buying actively managed large blend; I’m just indexing,'” says Daniel Sotiroff, Senior Analyst for ETF and Passive Strategies at Morningstar. “Because it’s so brutally tough to beat a dirt-cheap index fund in the large blend category.”
Related: The 7 Best Closed-End Funds (CEFs) for 2026
If even the pros can’t beat it, I say we just buy it.
And there are few better ways to buy the S&P 500 than the Schwab S&P 500 Index Fund (SWPPX). Its razor-thin expense ratio of 0.02% doesn’t just undercut most S&P 500-tracking mutual funds—it’s cheaper than any S&P 500 ETF on the market.
The S&P 500 is a collection of 500 large American businesses that have met certain market cap, volume, and other criteria. Most notably, to join the index, a company must have positive earnings in the most recent quarter, and the sum of its previous four quarters must be positive: two criteria that weed out a few of even Wall Street’s biggest firms. (If you’re wondering: When a company that’s already in the S&P 500 suddenly fails to meet a criterion, it’s not automatically kicked out, but a selection committee might consider replacing that company with a different one.)
Related: The 16 Best ETFs to Buy for a Prosperous 2026
While the S&P 500 is supposed to reflect the U.S. economy, it’s not a perfect proxy, nor are all industries represented equally in the economy. For instance, tech companies account for a third of SWPPX’s assets; compare that to utilities, real estate, and materials, each of which merits 3% or less. That’s because, like many indexes, the S&P 500 is market capitalization-weighted, which means the greater the size of the company, the more “weight” it’s given in the index. Currently, multitrillion-dollar companies Nvidia (NVDA), Apple (AAPL), and Google parent Alphabet (GOOG/GOOGL) rank among Schwab S&P 500 Index Fund’s top holdings.
One factor to consider with some funds is turnover, which is how much the fund buys and sells its holdings. Trading increases costs and can result in capital-gains distributions, which are taxable (and in some cases receive unfavorable tax treatment). Fortunately, SWPPX’s turnover is extremely low, with only a handful of stocks entering or leaving the index in any given year, making this a very IRS-friendly option that you can feel comfortable holding in taxable brokerage accounts.
A combination of the S&P 500’s excellence as an index, as well as SWPPX’s bare-bones costs and tax-efficiency, merit a Gold Medalist rating from Morningstar. It’s just one of a handful of Schwab products that currently merit that coveted ranking, so we can confidently call it one of the best Schwab funds you can buy.
* There are different ways to define the different “cap” levels. We’re going by Morningstar’s definition, which says the largest 70% of companies by market capitalization within a fund’s “style” are large-caps, the next 20% by market cap are mid-caps, and the smallest 10% by market cap are small caps.
Related: The 10 Best Dividend ETFs [Get Income + Diversify]
2. Schwab U.S. Mid-Cap Index Fund
- Style: U.S. mid-cap stock
- Management: Index
- Assets under management: $2.4 billion
- Dividend yield: 1.4%
- Expense ratio: 0.04%, or 40 per year for every $1,000 invested
- Morningstar Medalist rating: Gold
I frequently refer to mid-cap stocks as “Goldilocks” stocks. It’s not that they’re perfect, per se; instead, it’s because they generally possess appealing traits of both their larger brethren (scale, more diverse revenue streams, good access to capital) and smaller firms (they’re nimble, and they have substantial upside potential). Funnily, as a result, they’re sometimes ignored by investors who instead gravitate toward bigger, “safer” blue chips or more potent small-caps.
Big mistake.
Related: 9 Best Schwab ETFs to Buy [Build Your Core for Cheap]
Here’s what Oregon-based equity manager Jensen Investment Management found in a study of mid-caps: “Since 1978, mid-cap stocks have outperformed small-caps over each of these rolling time periods: five, 10, 20, 30 and 40 years. They’ve even bested large-caps over the 30- and 40-year windows. These returns came with lower volatility than small-caps as well, making the evidence even more compelling. That means mid-caps haven’t just delivered better performance—they’ve done it more consistently, with fewer drawdowns.”
So, if you like your stocks like Goldilocks likes her porridge—”just right”—you can access these companies through the Schwab U.S. Mid-Cap Index Fund (SWMCX).
SWMCX, which tracks the Russell Midcap Index, holds roughly 800 stocks whose market caps rank among the 201st and 1,000th largest companies. As a result, about 70% of the fund’s holdings are mid-cap stocks. That might sound odd, but a mid-cap fund investing in smalls and larges is par for the course.
Related: 9 Best Fidelity ETFs for 2026 [Invest Tactically]
“The index selects larger stocks than most,” says Morningstar Associate Analyst Brendan McCann. “Larger stocks are generally less volatile, so the portfolio could exhibit lower volatility than its peers. … Size discrepancies can lead to divergent performance between the portfolio and its category peers.”
Single-stock exposure is minimal—every stock but one has a weighting of less than 1%. Top holdings right now include glass and materials specialist Corning (GLW) and advanced engineered solutions provider Howmet Aerospace (HWM).
SWMCX also charges extremely low fees and enjoys Morningstar’s highest Medalist rating, putting it at the tippy top of the best Schwab mutual funds.
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3. Schwab Total Stock Market Index Fund
- Style: U.S. all-cap stock
- Management: Index
- Assets under management: $37.4 billion
- Dividend yield: 1.2%
- Expense ratio: 0.03%, or 30¢ per year for every $1,000 invested
- Morningstar Medalist rating: Gold
The Schwab Total Stock Market Index Fund (SWTSX) product page says the fund is designed to “track the total return of the entire U.S. stock market.”
Listen: If we’re splitting hairs, SWTSX’s nearly 3,000-stock portfolio doesn’t technically equate to the “entire U.S. stock market.” But if we’re being pragmatic, that’s as close as you’ll ever need to get.
A total-market fund doesn’t necessarily provide equal exposure to all the different stock sizes, however. In fact, they’re usually market cap-weighted, which results in heavy concentration in larger companies. SWTSX, for instance, invests about 70% in large caps (like with the S&P 500 fund, Nvidia, Apple, and Alphabet are top weights here), 20% in mid-caps, and the remainder in smalls. And a reminder: That’s Schwab Total Stock Market Index’s current composition, but it can change over time.
Related: The 8 Best T. Rowe Price Funds for 2026
The point of a total-market fund like SWTSX is simplicity. One fund gets you exposure to most of the U.S. stock market—and it overloads you in the largest, most stable firms while providing only modest exposure to smaller, more volatile firms. Better still? You can get all this for just 0.03% in annual expenses. It’s a one-two punch of coverage and price that has been recognized with a Morningstar Gold Medalist rating, as well as inclusion on my list of Schwab’s top mutual funds.
How (or whether) you use it is a matter of preference.
If you like the exact breakdown of SWTSX’s large-, mid-, and small-cap exposure, you could make it the core of your portfolio and not have to bother with any other broad U.S. stock funds.
If you like the idea of owning all these different-sized stocks, but would want to do so in different ratios, you could either hold Schwab Total Stock Market Index Fund and augment with large-, mid-, and small-cap funds, or simply build your own ideal mixture of large-, mid-, and small-cap funds and leave SWTSX out of the process entirely.
Related: 7 Best High-Yield Dividend Stocks: The Pros’ Picks for 2026
4. Schwab U.S. Large-Cap Growth Index Fund
- Style: U.S. large-cap growth stock
- Management: Index
- Assets under management: $4.2 billion
- Dividend yield: 0.5%
- Expense ratio: 0.035%, or 35¢ per year for every $1,000 invested
- Morningstar Medalist rating: Silver
Company size isn’t the only way to slice and dice the stock market. You can also invest in stocks that exhibit certain “factors”—such as growth—with or without factoring in company size.
The Schwab U.S. Large-Cap Growth Index Fund (SWLGX) is a straightforward index fund that tracks the Russell 1000 Growth Index—right now, a collection of roughly 390 stocks that exhibit growth characteristics. Those characteristics are higher forecasted medium-term growth, higher sales-per-share historical growth, and (interestingly enough) higher price-to-book ratios relative to all of the securities in the Russell 1000 Index.
I say the high P/B is interesting because that’s not a growth metric, but a valuation metric—one that indicates a stock is potentially expensive, no less. However, it illustrates the commonly held idea that growth exists opposite of value. (Even though you can find companies that are both undervalued and have growth characteristics. But I digress.)
Related: 7 Best Vanguard Dividend Funds [Low-Cost Income]
Like many growth funds, SWLGX is all-in on tech stocks. The technology sector itself accounts for more than half of the fund’s assets. Consumer discretionary makes up another 13%, largely because of big holdings in tech-esque Amazon (AMZN) and Tesla (TSLA). And the tech-adjacent communication services sector accounts for another 13%. So it wouldn’t be a stretch to say that at least three-quarters of the fund’s assets are dedicated to stocks within technology’s orbit.
Schwab U.S. Large-Cap Growth Index is a relatively young fund that came to life in 2017, but it has provided the outperformance investors have wanted out of growth stocks, leading the S&P 500 in all meaningful time periods since inception. Add in a Silver Medalist rating, and SWLGX has a real case to be considered among the Schwab funds you can buy.
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5. Schwab Fundamental Global Real Estate Index Fund
- Style: Sector (Real estate)
- Management: Index
- Assets under management: $71.7 million
- Dividend yield: 3.5%
- Expense ratio: 0.39%, or $3.90 per year for every $1,000 invested
- Morningstar Medalist rating: Gold
The latest addition to our list of the best Schwab mutual funds is a product that homes in on a single sector: real estate. The Schwab Fundamental Global Real Estate Index Fund (SFREX) is a global portfolio of real estate investment trusts (REITs) and other real estate stocks. (Global, in investment-fund parlance, means “international + U.S.”)
REITs are a specially structured type of company that owns and sometimes operates real estate. They enjoy a special tax status that allows them to avoid corporate taxation so long as they distribute at least 90% of their net profits as dividends—and as a result, REITs tend to be among the highest-yielding sectors and a perennial favorite among income investors.
Related: 7 Best High-Dividend ETFs for Income-Hungry Investors
This Schwab fund tracks a “RAFI” (Research Affiliates Fundamental Index) series index that prioritizes fundamental metrics—adjusted sales, retained operating cash flow, and dividends plus buybacks—when both selecting and weighting its components. The resulting portfolio is split about 50/50 between U.S. and international REITs and other real estate equities. The overseas portion of the portfolio is most weighted in Japanese, Chinese, and Hong Kong property owners. It’s a fair blend of large-, medium-, and small-sized firms, too, at a 30/40/20 split.
Real estate can cover a wide range of industries, too. For instance, SFREX’s top holdings include Prologis (PLD), which owns warehouses and other logistics real estate; American Tower (AMT), a specialist in telecommunications infrastructure such as wireless and broadcast towers, data centers, and literally even rooftops; and diversified Japanese real estate developer Mitsui Fudosan (MTSFY).
These real estate plays combine to help Schwab Fundamental Global Real Estate Index Fund pay an attractive yield north of 3%. But understand that REITs are very tax-inefficient. They tend to pay nonqualified dividends, which are taxed as ordinary income (thus as high as 37%, depending on your tax bracket). So if at all possible, you’ll want to hold REITs and REIT funds like SFREX in a tax-advantaged plan like a 401(k) or IRA to negate those tax consequences.
Related: 9 Best Alternative Investments [Options to Consider]
6. Schwab Fundamental International Large Company Index Fund
- Style: International large-cap stock
- Management: Index
- Assets under management: $4.6 billion
- Dividend yield: 3.3%
- Expense ratio: 0.25%, or $2.50 per year for every $1,000 invested
- Morningstar Medalist rating: Silver
You’ve probably noticed by now that this list of funds, like many, is loaded with U.S.-centric options. That’s for good reason. U.S. markets have long been among the most productive in the world, and if you believe in the American economy’s ability to keep growing, that should remain the case. Thus, most financial experts here will direct you to gobble up U.S. stock funds.
But those same experts would tell you that it’s worth having at least some international exposure. And you can do that smartly and efficiently through the Schwab Fundamental International Equity Index Fund (SFNNX).
Related: The Best Dividend Stocks: 10 Pro-Grade Income Picks for 2026
SFNNX also tracks a RAFI fund that, from 10,000 feet, doesn’t appear to make much of a difference. Top country allocations are pretty similar to what you’d get in other large-cap international funds—a heavy dose of Japan (24% of assets), and considerable exposure to other European developed markets such as the U.K. (15%), France (8%), and Germany (8%). Top holdings? Similar again! Big, blue-chip firms like South Korea’s Samsung and British energy giant Shell (SHEL) can be found in many competitor funds. And while the dividend is indeed juicy compared to U.S. blue-chip funds, that’s also typical of most international large-cap offerings.
But SFNNX’s fundamental focus has made itself heard where it counts: performance. Schwab Fundamental International Equity Index soundly tops its basic-index counterpart, Schwab International Index Fund (SWISX), over most meaningful time frames … even with its pricier (but still cheap) expense ratio.
Related: 8 Best Schwab Index Funds for Thrifty Investors
7. Schwab U.S. Aggregate Bond Index
- Style: U.S. intermediate-term bond
- Management: Index
- Assets under management: $8.0 billion
- SEC yield: 4.3%*
- Expense ratio: 0.04%, or 40¢ per year for every $1,000 invested
- Morningstar Medalist rating: Bronze
Most investors need some exposure to bonds, which is debt that’s issued by governments, companies, and other entities. Their interest payments and relative lack of volatility make them an excellent tool for providing a portfolio with stability and income.
How much bond exposure you need will vary by age. They’re not great for generating wealth, which is your prime concern when you’re younger, but they’re outstanding for protecting wealth, which becomes increasingly pivotal as you age. So generally speaking, when you’re younger, you’ll want to be primarily invested in stocks … and as you get older, you’ll want to go lighter on stocks and start buying more bonds.
Related: The 7 Best Gold ETFs You Can Buy
Regardless of how much or how little fixed-income exposure you need, however, you might want to avoid individual bonds. Data and research on single debt issues is much thinner than it is for publicly traded stocks. And some bonds have minimum investments in the tens of thousands of dollars. So, your best (and most economical) bet is to buy a bond fund, which allows you to invest in hundreds or even thousands of bonds with a single click.
One of the best Schwab mutual funds you can buy for this access is the Schwab U.S. Aggregate Bond Index Fund (SWAGX), which holds a whopping 11,170 debt issues. At the moment, 45% of the portfolio is in U.S. government bonds, while mortgage-backed securities (MBSes) and corporate bonds account for another 25% apiece. The rest is scattered across foreign sovereign bonds, municipal bonds, and other debt.
Related: 5 Best Silver ETFs You Can Own
SWAGX’s maturities range from less than a year to more than 20 years. Meanwhile, duration—a measure of interest-rate sensitivity—is 5.8 years, implying that a 1-percentage-point hike in interest rates would result in a short-term decline of 5.8% for the fund, and vice versa. In short, this is moderate interest-rate risk, which is perfectly acceptable for a basic core bond holding.
* SEC yield reflects the interest earned across the most recent 30-day period. This is a standard measure for funds holding bonds and preferred stocks.
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8. Schwab Short-Term Bond Index Fund
- Style: U.S. short-term bond
- Management: Index
- Assets under management: $1.6 billion
- SEC yield: 3.9%
- Expense ratio: 0.06%, or 60¢ per year for every $1,000 invested
- Morningstar Medalist rating: Silver
Short-term bonds don’t always make sense for investors, depending on the rate environment.
Right now, for instance, yield curve is no longer inverted (inversion is when short-term rates are higher than long-term rates). However, short-term bonds still offer relatively high yields for relatively low risk. Moreover, the Federal Reserve lowered its benchmark interest rate three times in 2025, and many expect it to continue doing so in 2026. While that might not do much to budge long-term rates, which have remained high amid worries about inflation and the deficit, a reduction in the federal funds rate (the overnight lending rate used by banks) should drive down shorter-term rates, which in turn should make existing short-term bonds worth more.
Related: 11 Best Vanguard Funds for the Everyday Investor
All of that’s a way to say it might make sense to keep a decent chunk of your overall bond exposure in short-term bond funds like the Schwab Short-Term Bond Index Fund (SWSBX).
SWSBX holds 3,200 bonds with a weighted average maturity of less than three years. About 70% of its assets are invested in U.S. Treasuries and other government securities, a quarter is in high-quality corporate short-term bonds, and the remaining sliver is in foreign government bonds, other debt, and cash.
Duration is a low 2.6 years, meaning a change of rates won’t have a massive impact on SWSBX’s price in either direction; but you could do worse than collecting almost 4% in a low-volatility bond fund with the potential for a little upside should the Fed decide to cut later this year.
If you’re looking for a low-stress addition to a retirement portfolio, Schwab Short-Term Bond Index Fund fits the bill.
Related: 7 Low- and Minimum-Volatility ETFs for Peace of Mind in 2026
9. Schwab Treasury Inflation Protected Securities Index Fund
- Style: Treasury Inflation-Protected Securities
- Management: Index
- Assets under management: $3.0 billion
- SEC yield: 1.8%
- Expense ratio: 0.05%, or 50¢ per year for every $1,000 invested
- Morningstar Medalist rating: Silver
The Schwab Treasury Inflation Protected Securities Index Fund (SWRSX) is the newest addition to this list, and it focuses on a small but usefull niche within the debt market.
Treasury Inflation-Protected Securities, or TIPS, are government bonds whose returns are connected to changes in the consumer price index—specifically, the “Non-seasonally Adjusted Consumer Price Index for All Urban Consumers” (CPI-U). As the CPI (and thus inflation) increases, so too do TIPS. Here’s an example to help you out:
You buy $50,000 in U.S. TIPS with a 4% coupon. Inflation in the first year is 5%. The face value of your TIPS would be adjusted higher by 5% ($2,500), to $52,500. The 4% coupon would remain the same, but it would be based on the adjusted face value. So instead of receiving $2,000 in annual interest, you would receive $2,100. (Note: Like other Treasury-issued bonds, TIPS pay semiannually.)
Related: What Is SPLV? A Quick Guide to the Invesco S&P 500 Low Volatility ETF
Just understand that TIPS have their downsides, too. They not only face the same interest-risk issues of regular bonds, but expectations for low inflation (and even deflation) can weigh on their value.
Schwab’s TIPS fund owns 50 different TIPS issues. Individual TIPS come in maturities of five, 10, and 30 years, so it’s no surprise that most of the fund’s assets is invested in TIPS with remaining maturities of either one to five years (50%) or five to 10 years (35%), with the rest scattered across longer-term maturities. The fund’s duration at the moment is 6.5 years.
TIPS, like other Treasuries, are exempt from local and state taxes, so a retirement account blunts some of that advantage. Still, a 401(k) or IRA shields you from federal taxation on that income, as well as the moderate turnover (30% in SWRSX’s case).
Do you want to get serious about saving and planning for retirement? Sign up for Retire With Riley, Young and the Invested’s free retirement planning newsletter.
10. Schwab Target Index Funds
- Style: Target-date
- Management: Index
- Assets under management (collectively): $10.9 billion
- Expense ratios: 0.08%*, or 80¢ per year for every $1,000 invested
- Morningstar Medalist rating: Bronze
Target-date funds are the ultimate buy-and-hold instrument, meant to stay in your portfolio for literally decades.
Target-date funds are funds that shift their asset allocation over time to meet investors’ changing needs as they age. A person who turned age 25 in 2025 would expect to retire in 2065, so they’d buy a fund with a target retirement date of 2065. That fund would probably start out with a very heavy allocation to stocks (to grow the investors’ wealth), but as the years rolled on and the fund approached its target retirement date, it would start putting more of its assets into bonds (to protect the investors’ wealth).
Schwab offers two target-date fund series, both of which hold various funds to provide exposure to U.S. and international stocks and bonds:
- Schwab Target Funds: These hold a collection of actively managed and index funds. While most of Schwab Target Funds’ holdings are other Schwab mutual funds, they will also hold funds from outside providers, including Dodge & Cox and Baird.
- Schwab Target Index Funds: These primarily hold indexed Schwab ETFs.
Related: iShares Target-Date ETFs: A Retirement Tool for All
In general, both of Schwab’s target-date fund series are economical, but the Schwab Target Index Funds are flat-out cheap, at just 0.08% in annual expenses. And at least as far as Morningstar Medalist ratings go, the Target Index Series is considered the better of the two, earning a Bronze rating.
A quick look at the full lineup:
- Schwab Target 2010 Index Fund (SWYAX)
- Schwab Target 2015 Index Fund (SWYBX)
- Schwab Target 2020 Index Fund (SWYLX)
- Schwab Target 2025 Index Fund (SWYDX)
- Schwab Target 2030 Index Fund (SWYEX)
- Schwab Target 2035 Index Fund (SWYFX)
- Schwab Target 2040 Index Fund (SWYGX)
- Schwab Target 2045 Index Fund (SWYHX)
- Schwab Target 2050 Index Fund (SWYMX)
- Schwab Target 2055 Index Fund (SWYJX)
- Schwab Target 2060 Index Fund (SWYNX)
- Schwab Target 2065 Index Fund (SWYOX)
- Schwab Target 2070 Index Fund (SWYPX)
Schwab Target Index Funds are considered passively managed because their underlying funds are indexed. But they (along with Schwab Target Funds) are still managed by three human managers: Zifan Tang, Patrick Kwok, and Drew Hayes.
* Schwab’s target-date funds have temporary fee waivers to bring their net expense ratio down to 0.08%. These waivers will remain as long as Schwab Asset Management serves as the adviser to the fund. The agreement can only be amended or terminated with the approval of the fund’s Board of Trustees.
For a longer explanation of Schwab’s target-date lineups, read our Beginner’s Guide to Schwab Target-Date Funds.
Related: The 10 Best Vanguard Index Funds You Can Buy
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Morningstar Investor provides a wealth of information and comparable data points about mutual funds and ETFs—fees, risk, portfolio composition, performance, distributions, and more. Morningstar experts also provide detailed explanations and analysis of many of the funds the site covers.
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What Is the Minimum Investment Amount on Schwab Mutual Funds?
Schwab is one of the most friendly fund companies for beginners. That’s not just because both its mutual funds and ETFs sport below-industry-average expense ratios, but because you don’t need much money to invest in them in the first place. Most Schwab mutual funds have a negligible investment minimum—you can literally start with as little as $1.
That’s extremely beneficial in self-directed accounts like an IRA. Many mutual funds from other providers require high minimums in the thousands of dollars, hamstringing investors with little capital to work with.
What Is a Mutual Fund?
A mutual fund is an investment company that pools money from many investors to buy stocks, bonds or other securities. The investors get the benefits of professional management and certain economies of scale. A pool of potentially millions or even billions of dollars is large enough to diversify and might have access to investments that would be impractical for an individual investor to own.
Here’s an example: An investor wanting to mimic the S&P 500 Index (an index made up of 500 large, U.S.-listed companies) would generally have a hard time buying and managing a portfolio of 500 individual stocks, especially in the exact proportions of the S&P 500 Index. Another example: An investor wanting a diversified bond portfolio might have a hard time building one when individual bond issues can have minimum purchase sizes of thousands (or tens of thousands!) of dollars.
Equity funds or bond funds will generally be a far more practical solution.
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Actively Managed Funds vs. Index Funds
There are infinite types of mutual funds, but all can be divided into two main camps:
— actively managed funds
— passively managed funds, also known as passive funds or, most commonly, index funds
Actively managed funds have professional managers that use their discretion to buy and sell securities. Whether they are value funds, growth funds, or anything in between, they are all essentially run the same way: A manager or team of managers buys and sells stocks, bonds, or other securities in the pursuit of price returns, dividends/income, or both.
Related: The 7 Best Mutual Funds for Beginners
Index funds, in contrast, are passive. There’s no manager actively looking to “beat the market.” The fund is simply looking to copy an index—which is based on a set of rules that the index automatically applies—enjoying that underlying investment exposure. Actively managed stock funds will try to cherry pick the stocks or bonds they like best. An index fund simply buys whatever its rules say to buy, then lets that portfolio run until it’s time to “rebalance” (apply the rules again).
Related: 5 Best Stock Recommendation Services [Stock Tips + Picks]
The primary advantages of actively managed funds is that a talented manager can potentially outperform over time and may be adept at navigating a difficult period such as a bear market. But with an index fund, you generally get much lower costs in terms of management fees and trading expenses, better tax efficiency and performance that often ends up being better than that of many active managers.
What Are Balanced Mutual Funds?
Balanced mutual funds, sometimes also called “hybrid funds” or “allocation funds,” hold both stocks and bonds. However, while the name might imply that all balanced funds hold an equal amount of stocks and bonds, that’s not quite the case.
Some balanced funds are “aggressive” and dedicate far greater assets to stocks than bonds—say, 80/20 stocks, or 70/30 stocks. Meanwhile, some balanced funds are “conservative” and invest most of their assets in bonds. Still more are much closer to a 50/50 split.
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How Are Mutual Funds Different From Exchange-Traded Funds?
There is a lot of overlap between traditional mutual funds and their cousins, exchange-traded funds (ETFs). That’s because exchange-traded funds are very similar to mutual funds, but with a few different traits.
Related: 5 Best Energy ETFs for the Rise of Oil, Natural Gas + More
Like traditional mutual funds, an ETF will hold a basket of stocks, bonds, and other securities. These can be broad and tied to a major index like the S&P 500, or they can be exceptionally narrow and focus on a specific sector or even a specific trading strategy. For the most part, anything that can be held in an exchange traded fund can also be held in a mutual fund.
But there are some major differences. When you invest in a mutual fund, you (or your broker) actually send money to the manager, who in turn uses the cash to buy stocks or other investments. When you want to sell, the manager will sell off a tiny piece of the securities the mutual fund owns and send you the proceeds. Money generally enters or exits the fund once per day.
Related: 7 Best Fidelity Retirement Funds [Low-Cost + Long-Term]
Exchange-traded funds, on the other hand, trade on the New York Stock Exchange or another major exchange like a stock. If you want to buy shares, you don’t send the manager money; you just buy shares from another investor on the open market.
There are two advantages here. The first is that ETFs allow for intraday liquidity. If you want to buy or sell in the middle of the trading day—or multiple times throughout the trading day—you can.
The second advantage is tax efficiency. In a traditional mutual fund, redemptions by investors can generate selling by the manager that creates taxable capital gains for the remaining investors who didn’t sell. This doesn’t happen with ETFs, as the manager isn’t forced to buy or sell anything when an investor sells their shares.
Related: The 9 Best ETFs for Beginners
Why Does a Fund’s Expense Ratio Matter So Much?
Every dollar you pay in expenses is a dollar that comes directly out of your returns. So, it is absolutely in your best interests to keep your expense ratios to an absolute minimum.
The expense ratio is the percentage of your investment lost each year to management fees, trading expenses and other fund expenses. Because index funds are passively managed and don’t have large staffs of portfolio managers and analysts to pay, they tend to have some of the lowest expense ratios of all mutual funds.
This matters because every dollar not lost to expenses is a dollar that is available to grow and compound. And over an investing lifetime, even a half a percent can have a huge impact. If you invest just $1,000 in a fund generating 5% per year after fees, over a 30-year horizon, it will grow to $4,116. However, if you invested $1,000 in the same fund, but it had an additional 50 basis points in fees (so it only generated 4.5% per year in returns), it would grow to only $3,584 over the same period.
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Related: The 10 Best-Rated Dividend Aristocrats Right Now
Dividend growth puts more cash in our pockets and signals that the company we’re invested in is confident in its ability to keep churning out profits. And there’s no more heralded group of dividend growers than the Dividend Aristocrats, which are companies that have paid higher cash distributions each year for at least a quarter-century.
But even Aristocrats aren’t created equally. Check out which dividend growers Wall Street loves the best right now in our list of the top-rated Dividend Aristocrats.
Related: 10 Best Monthly Dividend Stocks for 2026
The vast majority of American dividend stocks pay regular, reliable payouts—and they do so at a more frequent clip (quarterly) than dividend stocks in most other countries (typically every six months or year).
Still, if you’ve ever thought to yourself, “it’d sure be nice to collect these dividends more often,” you don’t have to look far. While they’re not terribly common, American exchanges boast dozens of monthly dividend stocks.
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