Best Schwab Index Fund Portfolios

Best Schwab Index Fund Portfolios

Schwab DIY Portfolios

The internet has liberated the individual investor and companies like Vanguard and Charles Schwab have made it easy to set up an DIY Index Fund Portfolio.  In about 10 minutes you can set everything up and you’ll be able to rebalance your account once a year for about another hour of work.  This is a great option for those who want to have more control over their investments, but if you prefer a completely hands off approach then you might want to consider a Robo-advisor and you can read more about the pros and cons here – Robo-Advisors vs DIY Index Fund Investing.

Robo-Advisor vs Index Funds

Schwab Mutual Funds vs ETFs

You have two ways to get access to Index Funds with Schwab, either through their Mutual funds or ETFs.  Both have their pros and cons but ultimately I chose to use mutual funds because they allow automatic investing and you can also buy a set amount (e.g. $100.00).

ETFs (Exchange Traded Funds)

Pros:

  • Can buy and sell anytime during trading hours
  • Order filled immediately (when the market is open)

Cons:

  • Can NOT buy in a set amount (e.g. $100.00)
  • No automatic investing 

Mutual Funds

Pros:

  • Automatic Investing
  • Can buy in a set amount (e.g. $100.00)

Cons:

  • Orders are only filled at the end of the day
  • Orders filled at the “market” rate

 

When I first started DIY investing I was using ETFs.  I liked the fact that I could buy and sell them whenever I wanted and didn’t have to wait until the end of the trading day for my orders to be filled like with mutual funds.  But this proved to be a double edged sword.

When you have the opportunity to buy and sell whenever you want, emotion can easily get the best of you.  You might hear some news about how fiscal stimulus talks are stalling out in congress and how it’s going to tank the market and then sell all of your shares.  Only to have the stock market rally because on vaccine hopes.

It is imposisble to predict what is going to happen in the market and you are better off creating a consistent strategy and sticking to it.  An automatic investing plan is the best way to do that and mutual funds still allow you to sell or buy shares at the end of the trading day if you want to.

 

 

The Best Schwab 1 Fund Portfolio

 

Schwab 1 Fund Portfolio

If you are just getting started or have been putting off investing, you can start with this super simple 1 Fund Portfolio:

100% – SWTSX – Schwab Total Stock Market Index Fund – Net Expense Ratio 0.030%

Includes about 3,741 US stocks that trade on the U.S. stock exchanges; it includes large, mid, small and micro cap companies.

You can set up an automatic investing plan with a minimum of $100.00 and this can be done on a monthly, bi-monthly or quarterly basis.

If you have been hesitating getting started, simply starting with $100.00/month into this index fund is a great way to get started.

 

 

The Best Schwab 2 Fund Portfolio

 

Schwab 2 Fund Portfolio

The 2 Fund Portfolio adds a bond fund to the Total Stock Market Fund in the 1 Fund Portfolio:

75% – SWTSX – Schwab Total Stock Market Index Fund – Net Expense Ratio 0.030%

25% – SWAGX – Schwab Us Aggregate Bond Index Fund – Net Expense Ratio 0.040%

Conventional investing wisdom says that you should be more heavily invested in stocks when you’re younger and slowly buy more bonds over time.  Using your age as the percentage of bonds is a good place to start.  So if you are 25 years old, then a Portfolio of 25% Bonds and 75% Stocks makes sense.

The most stocks you have, the more volatile your portfolio will be, but it will also have a larger potential for gains.

You can set up automatic investing for $400.00/month:

$300.00 – SWTSX – Schwab Total Stock Market Index Fund

$100.00 – SWAGX – Schwab Us Aggregate Bond Index Fund

 

 

The Best Schwab 3 Fund Portfolio

 

Schwab 3 Fund Portfolio

The 3 Fund Portfolio adds SWISX,  The Schwab International Index which includes common stocks of the 350 largest publicly traded companies from selected countries outside the United States.  This provides more exposure to global markets and further diversification.

50% – SWTSX – Schwab Total Stock Market Index Fund – Net Expense Ratio 0.030%

30% – SWAGX – Schwab Us Aggregate Bond Index Fund – Net Expense Ratio 0.040%

20% – SWISX – Schwab Big International Companies Index Fund – Net Expense Ratio 0.06%

 

You can set up automatic investing for $500.00/month:

$250.00 – SWTSX – Schwab Total Stock Market Index Fund

$150.00 – SWAGX – Schwab Us Aggregate Bond Index Fund

$100.00 – SWISX Schwab Big International Companies Index Fund

 

 

The Best Schwab 4 Fund Portfolio

 

Schwab 4 Fund Portfolio

The 4 Fund Portfolio adds a Real Estate fund for even more diversification.

50% – SWTSX – Schwab Total Stock Market Index Fund – Net Expense Ratio 0.030%

30% – SWAGX – Schwab Us Aggregate Bond Index Fund – Net Expense Ratio 0.040%

10% – SWISX – Schwab Big International Companies Index Fund – Net Expense Ratio 0.06%

10% – SFREX – Schwab Fundamental Global Real Estate Index Fund – Net Expense Ratio 0.390%

 

You can set up automatic investing for $1,000.00/month:

$500.00 – SWTSX – Schwab Total Stock Market Index Fund

$300.00 – SWAGX – Schwab Us Aggregate Bond Index Fund

$100.00 – SWISX Schwab Big International Companies Index Fund

$100.00 – SFREX – Schwab Fundamental Global Real Estate Index Fund – OR – SFENX Schwab Fundamental Emerging Market Large Companies Index

 

 

The Best Schwab 5 Fund Portfolio

 

Schwab 5 Fund Portfolio

The 5 Fund Portfolio includes both the Emerging Market Fund and the Real Estate Fund for even more diversification.

With this portfolio, you get exposure to the large, mid and small cap US Stocks.  Large and mid cap international stock, the global real estate market and is balanced out by 30% aggregate bonds.  

40% – SWTSX – Schwab Total Stock Market Index Fund – Net Expense Ratio 0.030%

30% – SWAGX – Schwab Us Aggregate Bond Index Fund – Net Expense Ratio 0.040%

10% – SWISX – Schwab Big International Companies Index Fund – Net Expense Ratio 0.06%

10% – SFREX – Schwab Fundamental Global Real Estate Index Fund – Net Expense Ratio 0.390%

10% – SFENX – Schwab Fundamental Emerging Market Large Companies Index  – Net Expense Ratio 0.390%

 

You can set up automatic investing for $1,000.00/month:

$400.00 – SWTSX – Schwab Total Stock Market Index Fund

$300.00 – SWAGX – Schwab Us Aggregate Bond Index Fund

$100.00 – SWISX Schwab Big International Companies Index Fund

$100.00 – SFENX – Schwab Fundamental Emerging Market Large Companies Index

$100.00 – SFREX – Schwab Fundamental Global Real Estate Index Fund

 

Index Fund Allocations

The allocations above are not set in stone and are meant to be a starting point.  You can increase or decrease your precentage in bonds or other funds to match your personal risk tollerance.  Generally speaking bonds are a safer investment and the older you are the more bonds you should have.  The easiest way to allocate bonds is to use your age as the percentage (a 25 year old with 25% bonds).

Proper-Asset-Allocation-Stocks-Bonds-CONVENTIONAL

 

How to Set Up Mutual Fund Automatic Investing 

In order to set up automatic investing you will need to buy at least $1.00 worth of shares.  First log into your Schwab account click on Trade and then Mutual Funds.

Type in the Mutual Fund that you want to buy and click buy.

How to Buy Schwab Mutual Funds

Review your order and make sure that you select “Reinvest Dividends and Capital Gains”.

Once you have all of your funds, click on Automatic Investing and pick how much and how often you want to invest.

schwab automatic investing

Disclaimer:

I am not a certified financial planner and the opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry.  Always do your own research and invest at your own risk.

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