Guide to the Best Charles Schwab ETF List of 2022

Charles Schwab is a U.S. based financial services company that offers various investment management services meant to cater to all types of investors. Clients receive investment advice and strategies to help them achieve the highest return of investment possible. Schwab offers various products for their clients, such as stocks, exchange-traded funds (ETF), mutual funds, and money.

This article aims to provide readers with an idea of how to start investing in an ETF. Here, you will learn the introductory information necessary to start building your investment portfolio. Also, you will see a list of the best ETFs with low fees.

Charles Schwab: An Overview

Schwab index funds have been in the market for several decades now, but it was only in 2009 that the company has started to offer exchange-traded funds. More than a decade later, Schwab has gained a reputation for offering profitable ETFs with low expense ratios. In fact, it was Schwab who first introduced the no-commission offers for an ETF, which other investment companies copied.

ETF is an abbreviation for “exchange-traded fund,” which is a type of investment fund traded on stock exchanges. It is a collection of investable assets like bonds or stocks which is used to track an index or to invest in a certain industry or sector. For investors, an ETF is a quick way to diversify their portfolio even though they only bought one security.

It is easy to confuse an ETF and mutual funds. In many ways, these two are the same. But the major difference between the two is that an ETF is traded throughout the day. In contrast, mutual funds are traded only once a day, after the market has closed.

Today, Schwab was ranked #1 for offering low-cost and free ETF trading by the Investor’s Daily Business. Investors can choose from the 2,000 index mutual funds and ETF products they offer. Also, it has a lot of ETF products apt for investors who have limited funds.

Why Choose Charles Schwab Index Funds?

Through the years, Schwab has gained popularity for offering affordable index funds. It has been favored by many for offering the best ETFs and mutual funds. Below are some of the specific reasons why Schwab continued to attract thousands of investors in the past decade.

  • Low-cost index funds

Many investors would attest to the affordability of Charles Schwab index funds. Each has affordable if not the lowest expense ratio in the market. Also, Schwab has numerous commission-free ETFs. Given these factors, it is no doubt that the company has developed a reputation for being an affordable discount broker. It has maintained its brand of being one of the most reachable ETF issuers in the globe.

  • Easy and effective research

There is no denying that investing can be a tough job because of the many information you need to read and understand. It is overwhelming for beginners to encounter terms like Stock Market Index Fund, S&P 500 Index Fund, or Aggregate Bond ETF, and more.

But, those with Schwab brokerage accounts would find it easy to understand the details of the stocks and funds they are buying. Schwab has several resources, as well as help from third-party independent researchers, to guide investors to make the best investment decisions.

  • Large assets managed

Admittedly, Schwab only has a few ETFs. Despite this, it manages assets with $145 billion – fifth-largest U. S. ETF sponsor. This is an admirable feat considering that its competitors like Vanguard have way more ETF offerings. The large assets managed by Schwab tells us that its ETFs are highly in-demand.

Two Ways Schwab Categorizes Its Equity ETFs

Charles Schwab has two ways of categorizing its ETFs, namely, market-cap ETFs and Fundamental index ETFs. These are two methodologies used by Schwab when it comes to indexing its index funds. Note that both of these approaches can help you build and improve your investment portfolio.

1. Market-cap ETFs

These ETFs benchmark indexes to their portfolio based on the size of a company’s market capitalization or the total value of the shares of stock of the company. For example, Schwab has a so-called Schwab 1000 Index, which tracks the 1,000 largest companies traded on the stock market of the United States.

On the other hand, Schwab has the so-called Dow Jones U S Small-Cap Total Stock Market Index, which tracks the 1,750 smallest companies in the American stock market. You can see that both indexes sort the list of companies by market capitalization.

Under the market-cap ETFs of Schwab. They provide an easy way for their investors to invest in small-cap, mid-cap, and large-cap growth companies that are traded in the stock market. Note that U. S. small-cap companies are those with a market capitalization of less than $2 billion. Meanwhile, mid-cap has between $2 billion to $10 billion. And, U. S. large-cap companies are those with a market capitalization of more than $10 billion.

2. Fundamental index ETFs

While the market-cap ETFs are based on market capitalization, the Fundamental Index ETFs are based on three measurements of the company size. These are: first, adjusted sale; second, retained operating cash flow; and third, dividend and buybacks. Adjusted sales refer to the measurement of the company’s revenue. Meanwhile, retained operating cash flow refers to the total amount of cash the company keeps each year. And, dividend refers to the amount paid by the company to the shareholders.

Fundamental Index ETFs have higher expense ratios compared to market-cap ETFs. Also, they bear greater tax liabilities. Despite these disadvantages, Schwab’s Fundamental Index ETFs have shown better performance than its market-cap ETF counterparts. Hence, it is understandable why investors choose this.

How to Buy Schwab ETFs?

There are multiple ways to buy Schwab ETFs. You can directly buy the ETFs issued by Schwab. Also, you can buy from the Schwab ETF OneSource. Both of which have commission-free options.

If there are no commission-free products you can find, you can avail of Schwab’s brokerage commissions. Here, you will pay for an advisor who will help and guide you on where to invest your money. Opening a brokerage account does not necessarily mean spending a lot of money. If you play your cards right, your brokerage account can yield a high return on investment.

Buying Schwab ETFs are fairly simple and easy. Just follow the steps below and be a pro in no time!

1. Open an account at charles schwab website

The first thing you have to do is to open an account and put in the fund you are willing to invest. Take note that there are a wide selection of Exchange-traded funds (ETFs) at some of the lowest costs, so decide on which ones are the best for your portfolio.

2. Select number of shares you wish to purchase

On the website of Schwab, just use the ETF ticker and the number of shares you wish to purchase. If the ETF you chose is not commission-free, you also have to make sure that your account has enough cash to pay both for the price of the share and the added commission fee.

3. Build your portfolio and start trading!

When you start building your portfolio by buying ETFs, you can use the Personalized Portfolio Builder tool offered by Charles Scwab to simplify the process. You can as well use the variety of tools, guidance, and support designed they extend to beginners or have live support from Schwab Investment Professionals available 24/7 on their website support.

Wooden Block With ETF

7 Best Schwab ETFs for Low Fees

Charles Schwab, as an investment company, has a lot of index fund offerings for investors. Below are seven of the Schwab ETFs with low fees. These are for investors who do not have a lot of funds for their investment accounts. Maybe, one of these funds is right for you.

Note that each of these Schwab ETF is low-cost and has a minimal expense ratio. If you want to have an aggressive type of investment, these ETFs might not be right for you. The challenge here then is to look for the best Schwab index funds that can give you the highest amount of return given the limited amount you have invested.

1. Schwab U. S. Small-Cap ETF (SCHA)

Expense ratio: 0.04%

Management Style: Passively-managed index fund

This fund tracks the total return of the Dow Jones U. S. Small-Cap Total Stock Market Index. It is a low-cost and tax-efficient fund. It provides investors with simple access to U. S. small-cap equities. Also, it is best for those looking for long-term growth for their portfolio.

SCHA is one of the most affordable small-cap funds you can find in the market. It holds about 1,750 stocks and has around 8.3 billion of assets under management. Notably, this ETF has outperformed other funds in the past recent years. For example, it has outperformed Russell 2000 index, S&P Small-cap 600 indexes, S&P 500 Index Fund, or even larger ones like Schwab 1000 Index Fund (SNXFX).

Also, SCHA has allocated 31% of its weight in industrial and healthcare stocks and 37% of its weight in the technology and financial services sectors. While it was only launched a decade ago, this Schwab ETF has shown consistent growth and good performance. In fact, it is managing more than $8 billion in assets today.

2. Schwab Fundamental International Large Company Index ETF (FNDF)

Expense ratio: 0.25%

Management Style: Passively-managed index fund

This is a low-cost Schwab ETF that tracks the Russell RAFI™ Developed ex U.S. Large Company Index. It can serve as a good complement to a market-cap index fund or an actively managed ETF. Buying a similar ETF, a Large Company Index, from other investment advisors, will cost you so much more, around 0.42% compared to only 0.25% charged by Schwab.

The measurements used to construct the benchmark index of the Schwab Fundamental International Large Company ETF are adjusted sales, operating cash flow, and dividends and buybacks. Also, most of the companies in this ETF are based in Europe, Japan, and the U.K. This means that FNDF is good for those looking for an alternative for EAFE funds or those looking for a Schwab International Large Company Index.

3. Schwab U. S. Broad Market ETF (SCHB)

Expense ratio: 0.03%

Management Style: Passively-managed index fund

This ETF tracks the total return of the Dow Jones U. S. Broad Stock Market Index. It is designed to measure U. S. small-cap, mid-cap, and large-cap equities. This fund provides simple access to the 2,500 largest publicly traded U.S. companies, which means that it has four times the number of components in the S&p 500 index. You can use this ETF as the main fund of your portfolio.

Schwab U. S. Broad Market ETF has one of the most affordable ETFs offered in the U.S. One problem, though, is that it is fairly safe and has a low gain. Investors looking for high profit or return should not choose this fund. It is best for those looking for a conservative type of investment.

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

Expense ratio: 0.06%

Management Style: Passively-managed index fund

This ETF tracks the total return of the Dow Jones U. S. Dividend 100, which tracks the quality and sustainability of dividends. Since SCHD follows a focused approach, it is best to use it to complement a diversified portfolio. It has around $9.5 billion of assets in its management, which means that it is one of the largest dividend ETFs in the United States.

Also, it is one of the least expensive dividend ETFs in the market. Investment advisors and investors favor this fund because of the way it creates its index. It only includes stocks that had a consistent minimum dividend increase in the past 10 years.

5. Schwab U. S. Large-Cap Value ETF (SCHV)

Expense ratio: 0.04%

Management Style: Passively-managed index fund

This ETF tracks the return of the Dow Jones U. S. Large-Cap Value Total Stock Market Index. It gives investors access to large-cap equities in the United States that exhibit value style characteristics. It can serve as part of the core of your diversified portfolio.

Admittedly, Schwab U. S. Large-Cap Value ETF has not performed well in recent years, but it cannot be denied that it remains one of the least expensive index funds you can find today. As a result, this index fund is chosen by investors looking for a long-term investment. In total, this fund has 350 stocks, 22% of which are in the financial sectors, while 28% are in healthcare and technology.

6. Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE)

Expense ratio: 0.39%

Management Style: Passively-managed index fund

This index fund tracks the total return of the Russell RAFI™ Emerging Markets Large Company Index, which is a basket of the largest emerging markets companies based on fundamental measures. This Schwab emerging markets equity ETF is best paired with an index fund that has market-cap indexing, or that is actively managed.

Schwab Fundamental Emerging Markets Large Company Index ETF has remained productive in recent years, largely because of the emerging economies in Asia. Around 40% of the weight of this fund is on the stocks of Asian economies. It is a Schwab ETF that uses an alternative index methodology. It is similar to FNDF, but FNDE is for emerging markets.

7. Schwab U. S. Large-Cap Growth ETF (SCHG)

Expense ratio: 0.04%

Management Style: Passively-managed index fund

It is a Schwab ETF that tracks the total return of the Dow Jones U. S. Large-Cap Growth Total Stock Market Index. It provides simple access to large-cap U.S. equities, which must show growth style characteristics. This is an affordable fund that can provide tax-efficiency.

SCHG is similar to SCHV. The only difference is the focus of this Schwab total stock market ETF is on growth instead of value. Its approach to growth is traditional. For example, a large part of it, around 32%, is invested in technology stocks. This means that investors also have to manage their expectations on the return of their investment.

Related: Charles Schwab Dividend ETF

Bottom Line

The Schwab index funds mentioned above are for investors looking for affordable investment opportunities. Aside from being low-cost (each has a low expense ratio), they are also tax efficient. Despite these advantages, remember that they are low-risk, low-gain investments. Charles Schwab has other index funds for investors with a lot of funds that are expecting bigger gains or profit.

If you feel like the ETFs mentioned above are not right for you, Investoralist has other articles discussing other types of Charles Schwab index funds as well as index funds from other investment services. Browse this website to find other written materials and research tools to help and guide you in your investment. We do have detailed and in-depth discussions about Charles Schwab international and U. S. index funds, U. S. aggregate bond, Schwab U. S. broad market, and many more.

Aside from topics of Schwab mutual funds, index funds, and ETFs, Investoralist has other articles dedicated to explaining how to manage funds, diversify a retirement account, and find affordable expense ratios. Also, you can find our topics on real estate, money lending, credit score, and many more. All of these are easy-to-read and are friendly for beginners.

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