7 of the Best Charles Schwab Mutual Funds | Investing

It is difficult to define what makes a mutual fund “the best” because that answer depends heavily on an investor’s time horizon, risk tolerance and financial goals.

A retiree focused on capital preservation and dependable income will evaluate funds very differently from a college graduate selecting options in a workplace 401(k) plan and aiming for long-term growth. What works for one investor could be entirely unsuitable for another.

That said, there are objective metrics that help compare funds on a more standardized basis. One widely used framework comes from financial data provider Morningstar, which assigns star ratings based on risk-adjusted returns relative to a fund’s peer group.

Ratings range from one to five stars, with the top 10% of funds in a category receiving five stars and the next 22.5% receiving four stars, meaning four- and five-star funds fall within the top 32.5% based on risk-adjusted performance. These ratings are typically calculated over trailing three-, five- and 10-year periods, with an overall rating derived from a weighted blend of those time frames.

However, it is important to remember that these ratings are backward-looking and reflect how a fund has performed relative to peers in the past, not a guarantee of future results. They can serve as a starting point for research, but should not be the final decision-making tool.

“Before investing in any fund, investors should carefully review the fund’s prospectus and consider factors such as the fund’s investment strategy, fees and expenses, historical performance, and risk profile,” says Sean August, CEO of the August Wealth Management Group. “Additionally, investors should be aware of any tax implications associated, and consult with a financial advisor as needed.”

Here are seven of the best four- and five-star-rated Charles Schwab mutual funds to buy today:

Schwab S&P 500 Index Fund (SWPPX)

“A Charles Schwab mutual fund that hit the twin sweet spots of low cost and significant size is SWPPX,” says Michael Ashley Schulman, partner and chief investment officer at Running Point Capital Advisors, a multi-family office. This fund tracks the S&P 500 index for a low 0.02% expense ratio and has no minimum investment requirement. It is very well capitalized, with $130 billion in assets.

“The expense ratio is quite competitive, offering one of the lowest-cost core choices in the retail mutual fund space – in institutional terms, you are getting low-cost market beta with this fund,” Schulman explains. “It can be a long-term core holding for retirement accounts, automated savings plans and anyone prioritizing cost and simplicity over chasing the next chart-topping single.”

Schwab 1000 Index Fund (SNXFX)

“Even with low-fee funds, you still need to consider tax efficiency in your portfolios (especially in taxable accounts) and how the fund fits with your overall financial plan, asset allocation, risk budget and any overlay strategies,” Schulman explains. For example, investors may find it useful to identify funds suitable as tax-loss harvesting partners for their core holdings. For SWPPX, consider SNXFX.

This mutual fund also provides exposure to large-cap U.S. stocks, but it does not track the S&P 500 index. Instead, SNXFX’s benchmark is the broader Schwab 1000 Index, which is less top-heavy and has more mid-cap exposure. However, it still shares similar top holdings and historical performance with SWPPX, which can help investors maintain comparable exposures while avoiding the wash-sale rule.

Schwab Fundamental International Equity Index Fund (SFNNX)

“If you want niche equity exposure (e.g. international, emerging markets, private markets or specific themes), you may want additional complementary funds,” Schulman says. For example, an international fund like SFNNX can help investors tilt away from a tech- and growth stock-heavy U.S. portfolio. On average, SFNNX’s portfolio trades at more reasonable valuations versus domestic equities.

SFNNX tracks the RAFI Fundamental High Liquidity Developed ex U.S. Large Index. This benchmark doesn’t use market capitalization as its primary metric. Instead, stocks are screened and weighted based on factors like adjusted sales, retained operating cash flow, dividend yield and buybacks. However, the use of a rules-based methodology instead of active management keeps the expense ratio reasonable, at 0.25%.

Schwab Fundamental Emerging Markets Equity Index Fund (SFENX)

While SFNNX provides international exposure, investors should read the fine print. This fund only targets stocks from developed markets such as Japan, the U.K., Canada and countries in Western Europe, while excluding faster-growing emerging economies like Brazil, China and India. Stocks from these emerging markets tend to be more volatile, but they can also offer higher long-term growth potential.

Investors seeking targeted exposure to that segment can consider SFENX. Like its developed-market counterpart, SFENX does not weight holdings purely by market capitalization. Instead, SFENX uses fundamental metrics such as adjusted sales, retained operating cash flow, dividend yield and share buybacks to select and allocate its portfolio. The fund charges a 0.39% expense ratio.

Schwab Small-Cap Equity Fund (SWSCX)

“At our firm, we only utilize mutual funds within 401(k) plans that do not permit index funds or individual securities through a self-directed brokerage window,” August explains. “In these cases, we focus on selecting institutional-quality mutual funds that demonstrate strong long-term performance, competitive expense ratios and broad diversification within their universe.”

A good example is SWSCX, an actively managed fund that has outperformed both the Russell 2000 index and the Morningstar small-blend category across the trailing 10-, five- and three-year periods. That outperformance persisted despite a relatively high 1.09% expense ratio. However, the fund’s very high 107% portfolio turnover rate can lead to sizable year-end capital gains distributions.

Schwab Health Care Fund (SWHFX)

Investors who want to express a targeted thesis rather than simply track broad market performance may consider a sector-specific fund such as SWHFX. This actively managed fund focuses exclusively on the health care sector, which spans pharmaceutical companies, biotechnology firms, health care facilities, medical equipment manufacturers and distributors, and health care services providers.

However, investors must be comfortable with concentration risk. SWHFX’s portfolio only has 85 holdings, all within a single sector, which increases sensitivity to industry-specific regulatory, reimbursement and pipeline risks. The largest holding is currently Eli Lilly & Co. (LLY), which accounts for about 13% of assets, making it a meaningful driver of performance and risk. SWHFX charges a 0.8% expense ratio.

Schwab Target 2060 Index Fund (SWYNX)

Sector-specific funds like SWHFX require more hands-on oversight. Investors must stay aware of regulatory changes, competitive dynamics and earnings cycles that can disproportionately affect a single industry. Timing and position sizing become more important when exposure is concentrated. For those seeking a hands-off approach, a target-date fund such as SWYNX may be more appropriate.

SWYNX provides a globally diversified mix of stocks and bonds that automatically adjusts over time through a glide path designed to match an investor’s decreasing risk tolerance as retirement approaches. Although the fund is built for investors targeting retirement around 2060, as of 2026 it remains heavily weighted toward equities, with only a modest bond allocation to prioritize long-term growth.