Schwab Fund Investment: A Beginner's Guide To Getting Started

Charles Schwab is a brokerage and fund supermarket that runs $692 billion worth of its own funds, ranking it among the top 10 largest fund families in total net assets. The company offers a diverse range of investment options to suit the needs of all types of investors. Morningstar, a well-respected investment research firm, has developed a rating system to help investors evaluate funds. This system assigns one to five stars, with the top-performing funds within each peer category receiving four or five stars. Charles Schwab's top-performing funds include the Schwab S&P 500 Index Fund (SWPPX), the Schwab International Index Fund (SWISX), and the Schwab U.S. Large-Cap Growth Index Fund (SWLGX). These funds offer a range of investment opportunities, from tracking the S&P 500 index to investing in international stocks and large-cap growth stocks.

Schwab S&P 500 Index Fund (SWPPX)

The Schwab S&P 500 Index Fund (SWPPX) is a mutual fund with a Morningstar Medalist Rating of Gold. It is a large-cap blend, passively managed index fund that aims to track the total return of the S&P 500 Index, which is a popular measure of the U.S. stock market. This fund has outperformed the category average during the prior one-, three-, five-, 10- and 15-year periods.

SWPPX has an incredibly low expense ratio of 0.02%, which is tough to beat, and its portfolio maintains a sizable cost advantage over competitors. It has no investment minimum, making it a straightforward, low-cost fund. The fund invests in some of the most well-known U.S.-based companies, providing simple access to 500 leading U.S. companies and capturing approximately 80% coverage of available U.S. market capitalization.

As of October 8, 2024, the total assets of the fund were 104.4 billion USD, with a 1-day return of -0.95%. The fund's top two holdings, Apple (AAPL) and Microsoft (MSFT), make up roughly 13% of its portfolio, which is similar to the index itself. The fund weightings by industries and individual stocks are also nearly identical to the S&P 500's.

SWPPX has delivered strong historical performance, with an annualized total return of 14.8% over the past 15 years, outperforming the 13.7% average return of Morningstar's "Large Blend" category.

Schwab International Index Fund (SWISX)

The Schwab International Index Fund (SWISX) is a low-cost, diversified, passively managed index portfolio. It is a mutual fund with a Morningstar Medalist Rating and a total expense ratio of 0.060%. It has no investment minimum.

The fund's goal is to track the performance of a benchmark index that measures the total return of large, publicly traded non-U.S. companies from countries with developed equity markets outside of the United States. It invests in the largest companies across 21 developed markets in Europe, Australasia and the Far East.

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 has a 3.07% dividend yield, which tops the S&P 500's 1.29%.

The fund can serve as part of the core of a diversified portfolio, offering simple access to large-cap equities from developed international countries.

Schwab Health Care Fund (SWHFX)

The Schwab Health Care Fund (SWHFX) is one of the few actively managed funds in the Schwab lineup to earn a four-star Morningstar rating. The fund seeks long-term capital growth and offers convenient access to the health care sector. It provides exposure to a range of health care companies, including pharmaceutical and biotechnology companies, as well as medical product manufacturers and suppliers.

The SWHFX fund is an actively managed fund, meaning that it does not track a benchmark. Instead, a portfolio manager picks stocks based on an evaluation of health care stocks using three main variables: fundamentals, valuation, and momentum. These variables measure financial health, market price relative to perceived value, and recent price trends, respectively. The fund has a high turnover rate of 53% and a net expense ratio of 0.79%.

As of August 31, 2024, the Morningstar Medalist Rating for SWHFX was Neutral, based on an Average People Pillar rating and a Below Average Process Pillar rating. The fund's management team's experience and ability are evaluated as high-quality, delivering superior performance relative to their benchmarks and peers. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.

The top holdings of the SWHFX fund include Novo Nordisk A/S Class B, UnitedHealth Group Inc, Vertex Pharmaceuticals Inc, and Novartis AG Registered Shares. The fund was initiated on July 3, 2000, and has a total of $836.9 million in assets as of October 3, 2024.

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

The Schwab U.S. Large-Cap Growth Index Fund (SWLGX) is a mutual fund that aims to track the performance of a benchmark index, specifically the Russell 1000 Growth Index, which measures the total return of large-cap U.S. growth stocks. This fund is a straightforward, low-cost option with no investment minimum, making it accessible to a wide range of investors.

SWLGX is part of the Large Growth category and has a Morningstar Medalist Rating of Silver. As of August 31, 2024, it had a total asset value of $2.9 billion, a distribution fee level of low, and a share class type of no load. The expense ratio is 0.035%, which is within the least expensive fee quintile among its peers.

Notable top holdings of SWLGX include the "Magnificent Seven" stocks: Microsoft Corp. (MSFT), Apple Inc. (AAPL), Nvidia Corp. (NVDA), Amazon.com Inc. (AMZN), Meta Platforms Inc. (META), Alphabet Inc. (GOOG, GOOGL), and Tesla Inc. (TSLA). The fund is dominated by large-cap growth stocks from the technology, consumer discretionary, and communication sectors.

SWLGX can serve as a core component of a diversified portfolio, offering distinct style characteristics based on a thorough performance screening process. It provides simple access to "growth" equities as determined by the Russell U.S. Style Index.

Schwab MarketTrack Balanced Portfolio (SWBGX)

SWBGX combines Fundamental Index and market cap investment strategies with asset allocation in a single portfolio. The fund typically invests 50% to 70% of its shareholders' money in stocks, with a focus on U.S. stocks and a smaller portion in international stocks. It currently owns 13 Schwab funds, which helps keep costs down for investors.

The fund has a net expense ratio of 0.40% to 0.48%, which is higher than many passively managed index funds due to the inclusion of international funds and funds that consider fundamental factors in portfolio construction. This fund is suitable for cautious investors who want to control risk while seeking capital preservation and growth.

SWBGX has a fund inception date of November 20, 1995, and offers automatic portfolio rebalancing. It provides diversification across major segments of the U.S. stock market, along with international exposure. As of July 31, 2024, SWBGX had total net assets of $550.700 million, with a 52-week average return of 6.43%.

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