7 best Charles Schwab index funds to buy in 2025

Our investment experts have compared and reviewed many of the best index funds by Charles Schwab today and you can find out which ones rank top on this page. Read on to learn which Charles Schwab index funds you may want to consider buying in 2023. 

What are the 7 top Charles Schwab index funds to buy?

1. Schwab S&P 500 (SWPPX)
2. Schwab U.S. Aggregate Bond Index Fund (SWAGX)
3. Schwab Fundamental US Small Company Index Fund (SFSNX)
4. Schwab International Index Fund (SWISX)
5. Schwab U.S. Dividend Equity ETF (SCHD)
6. Schwab MarketTrack Balanced Portfolio (SWBGX)
7. Schwab Dividend Equity Fund (SWDSX)

The best Charles Schwab index funds, compared

1. Schwab S&P 500 (SWPPX)

Key details

• Date created: May 19, 1997
• Expense ratio: 0.02%
• 5-year return: 11.16%
• Minimum investment amount: $0
• Dividend yield: 1.52%
• Risk level: Low

The Schwab S&P 500 Index Fund is one of the most popular index funds globally and has a 5-star rating from Morningstar. With over $67 billion in assets under management, SWPPX is also one of the largest index funds. As its name suggests, it tracks the performance of the S&P 500 index, which comprises the 500 largest publicly traded companies in the United States. 

SWPPX gives investors exposure to a diverse range of companies, including Apple, Microsoft, Amazon, and Alphabet (Google). Its expense ratio is just 0.02%, making it one of the best low cost index funds for investing in U.S. companies It also offers exposure to various industries such as technology, healthcare, consumer discretionary, and financials.

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

Key details

• Date created: February 23, 2017
• Expense ratio: 0.04%
• 5-year return: 3.69%
• Minimum investment amount: $0
• Dividend yield: 2.80%
• Risk level: Moderate

The best Charles Schwab index fund for exposure to the bond market is the Aggregate Bond Index Fund. It’s a passively managed mutual fund that aims to replicate the performance of the Bloomberg U.S. Aggregate Bond Index.

SWAGX exposes investors to a diverse range investment-grade bonds and other fixed income securities. With over $4.4 billion in assets under management, SWAGX is one of the most popular bond index mutual funds worldwide.

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

Key details

• Date created: February 04, 2007
• Expense ratio: 0.25%
• 5-year return: 7.06%
• Minimum investment amount: $0
• Dividend yield: 1.16%
• Risk level: Moderate

The Schwab Fundamental US Small Company Index fund is one of the best index funds for gaining exposure to small-cap stocks. It’s a managed mutual fund that tracks the performance of the Russell RAFI US Small Company Index. This index includes small-cap U.S. stocks selected based on fundamental factors, including price-to-book ratio, earnings yield, and sales growth.

As it invests in smaller companies, the risk exposure is higher than other funds; however, it has a diverse portfolio that is spread relatively evenly, meaning no single stock can influence the overall fund. The fund has a low expense ratio of 0.25%, which is lower than many other small-cap actively managed funds. 

4. Schwab International Index Fund (SWISX)

Key details

• Date created: May 19, 1997
• Expense ratio: 0.06%
• 5-year return: 10.93%
• Minimum investment amount: $0
• Dividend yield: 2.55%
• Risk level: Moderate

Several funds are available that provide exposure to the global stock market, and the best offering from Charles Schwab is the International Index Fund. SWISX is a passively managed mutual fund which seeks to replicate the performance of the MSCI All Country World Index. 

The index comprehensively includes the best large-cap international stocks from developed and emerging markets. Like other Charles Schwab mutual funds, SWISX is a low-cost fund with an expense ratio of 0.06%, which means you’ll pay an annual cost of $6 for every $10,000 invested. Its mixture of developed and emerging markets mean investors gain broad exposure to international economic growth prospects. 

5. Schwab U.S. Dividend Equity ETF (SCHD)

Key details

• Date created: October 20, 2011
• Expense ratio: 0.06%
• 5-year return: 12.13%
• Minimum investment amount: $0
• Dividend yield: 3.58%
• Risk level: Moderate

Schwab U.S. Dividend Equity ETF  is an exchange-traded fund that tracks the performance of the Dow Jones U.S. Dividend 100 Index. It uses a passive strategy, which means the fund invests in all of the stocks that comprise the index. The Dow Jones U.S. Dividend 100 Index includes many U.S. large-cap stocks known for their history of paying dividends. 

The fund includes some of the world’s largest and best-known companies, including Johnson & Johnson, Exxon Mobil, and Wells Fargo. Not only does SCHD pay a healthy dividend, but it has also performed relatively strongly and has achieved annualised returns of 12.13% over the past ten years.  

6. Schwab MarketTrack Balanced Portfolio (SWBGX)

Key details

• Date created: November 20, 1995
• Expense ratio: 0.40%
• 5-year return: 7.33%
• Minimum investment amount: $100
• Dividend yield: 2.20%
• Risk level: Moderate

Schwab MarketTrack Balanced Portfolio is an index fund that offers investors stocks and bonds exposure. It tracks the performance of the Schwab MarketTrack Balanced Index, which has a target allocation of 60% stocks and 40% bonds. SWBGX offers investors a diversified portfolio that helps lower risk. 

SWBGX invests in various stocks and bonds from sectors including technology, healthcare, consumer discretionary, and industrials. It has also performed better than similar funds, with a 10-year annualised return of 7.33% and is one of the best Schwab mutual funds for long term investors.

7. Schwab Dividend Equity Fund (SWDSX)

Key details

• Date created: February 09, 2003
• Expense ratio: 0.89%
• 5-year return: 30.76%
• Minimum investment amount: $0
• Dividend yield: 2.26%
• Risk level: Moderate

The best fund from Charles Schwab for generating income is the Schwab Dividend Equity Fund. It’s a mutual fund that invests in companies expected to pay dividends. SWDSX also ensures that all its investments are eligible for reduced tax rates on qualified dividend income. 

The Schwab Dividend Equity Fund is actively managed, which means a team of analysts decide what to buy and sell. The fund’s managers use a proprietary tool called Schwab Equity Rating as one of several inputs to their investment process. SWDSX tracks the S&P High Dividend Low Volatility Index. This index is designed to measure the performance of a group of large-cap U.S. stocks with a history of paying high dividends.

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What is a Charles Schwab index fund?

Charles Schwab is a financial institution that offers many investment and financial services. It operates as a full-service brokerage firm, providing investors and institutions access to investment products, banking services, and more. One key part of its services is index funds. 

A Charles Schwab index fund is a type of investment fund that tracks the performance of a specific index. Charles Schwab offers several types of index funds, including actively managed and passively managed. Actively managed index funds are overseen by a team of fund managers who decide what to buy and sell. Passively managed index funds aim to replicate the performance of an underlying index. 

How much do Charles Schwab index funds cost?

For most passive funds the cost is less than 0.5% per year. Each index fund charges an annual maintenance or management fee, which is referred to as the fund’s ‘expense ratio’ and given as a percentage of your investment. 

For active funds, you may have to pay 0.75% or more. That type of mutual fund is run by active managers, so you’re paying for the time and expertise of the fund managers who decide which stocks to invest in.

In addition, you may have to pay a trading fee when you buy or sell a stake in a mutual fund. Some trading platforms charge a fee each time you make an investment. This varies depending on the brokerage you use; most services don’t charge any commission, others charge a couple of pounds each time.

How to choose the right Charles Schwab funds for you

Our experts ranked the best index funds based on a range of factors, from the annual running cost to the risk profile of each fund. You should use the same features to pick the mutual funds that suit your expectations and investment goals.

• Annual management fee. Each mutual fund charges an annual fee as a percentage of your investment. Passive funds tend to be cheaper, while active funds are more expensive. When you invest in Charles Schwab index funds, you’re normally looking to buy and hold for a few years. Small fee differences can add up to a big variation in returns over the long term, so you should favour mutual funds with the lowest maintenance fees.
• Fund size. The more money in an index fund, the more stable its performance is likely to be. Funds with low assets under management (AUM) can rely too heavily on the performance of one or two stocks and lack the diversification investors want. 
• Index fund weighting. Each index fund tracks a stock market index, but there can be big differences in how the fund tracks its benchmark index. Pay close attention to the weighting in particular. An index fund that scales its weighting so that a larger percentage, say 10%, goes into one or two stocks is going to be far more affected by the performance of those companies than one which invests 5% in all stocks equally.
• Risk profile. Each index fund factsheet has to report its risk profile on a scale between 1 and 7, with 7 being the riskiest. This synthetic risk and reward measure (SRRI) is an industry standard that you can use to compare risk across asset management companies. Less risk is better, but many people choose to have a balance of different risk profiles in their portfolio, as the riskier ones can generate higher returns (as well as higher losses).
• Hedging and currency risk. Every index fund is denominated in a particular currency, such as GBP or USD. That means that fluctuations in the strength of that currency can act as a drag or boost on performance. If your fund is in GBP and the pound is weak relative to USD, that means the fund will underperform the same fund denominated in USD. Some index funds hedge their currency risk to avoid this, others don’t.
• Share class. Some funds generate income from dividends. For these types of funds there are two share classes: income and accumulation. The former means that any income is paid out automatically, while accumulation means the money is automatically reinvested. Accumulation is more convenient, while income means you might build up spare cash in your brokerage account. An index fund can be one or the other, while some offer a choice between both.

Are Charles Schwab index funds a good investment?

Yes, you may want to consider investing in a Charles Schwab index fund, especially if you’re a beginner, have a long term outlook, or simply want a handfree approach to investing. Charles Schwab is one of the largest and more renowned investment firms in the world and due to its size, it can offer funds with low expense ratios. 

An expense ratio is an important metric to consider when investing in an index fund because it lets you know how much you will be charged. With some Charles Schwab index funds, it is possible to find expense ratios as low as a fraction of a percent, which is considerably cheaper than other providers. 

Charles Schwab isn’t the only index fund provider around and several other companies are offering similar services. It’s important you take the time to look at all options before investing, but if you do decide to go with Charles Schwab you’ll need to use a specific type of broker. Click the blue button below to choose from expertly selected platforms to buy the best Charles Schwab index funds.

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