7 of the Best Charles Schwab Mutual Funds
When discussing legendary mutual fund managers, few names receive as much attention as Peter Lynch. During his 13-year tenure managing the Fidelity Magellan Fund (ticker: FMAGX) from 1977 through 1990, Lynch generated an annualized return of 29%. But despite the fund’s exceptional performance, the average investor owning Fidelity Magellan earned considerably less than the fund itself.
The reason was behavior. Many investors bought after periods of outperformance and sold during downturns, creating a gap between the fund’s time-weighted return, which measures the manager’s investment skill, and investors’ dollar-weighted return, which reflects the timing and size of cash flows.
[Sign up for stock news with our Invested newsletter.]
That is why annualized returns alone should not drive fund selection. They can serve as a useful first screen, but investors should also consider how much risk was required to generate those returns.
Many investors instead rely on Morningstar’s star ratings, which compare funds against peers on a risk-adjusted basis. Ratings range from one to five stars, with the top 10% of funds in each category receiving five stars and the next 22.5% receiving four stars. Morningstar calculates these ratings using trailing three-, five- and 10-year periods, then combines them into an overall rating.
Most brokerage platforms, including Charles Schwab, make four- and five-star funds easy to identify using their screening tools. Even so, those ratings should be viewed as a starting point. Investors should also evaluate factors such as expense ratios and portfolio turnover, as higher fees reduce long-term returns and higher turnover can increase taxable capital gains distributions.
“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:
| Fund | Expense Ratio |
| Schwab S&P 500 Index Fund (SWPPX) | 0.02% |
| Schwab 1000 Index Fund (SNXFX) | 0.05% |
| Schwab U.S. Large-Cap Growth Index Fund (SWLGX) | 0.035% |
| Schwab Fundamental Emerging Markets Equity Index Fund (SFENX) | 0.39% |
| Schwab Fundamental International Equity Index Fund (SFNNX) | 0.25% |
| Schwab Fundamental U.S. Large Company Index Fund (SFLNX) | 0.25% |
| Schwab Small-Cap Equity Fund (SWSCX) | 1.09% |
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 at Cerity Partners. With $145 billion in assets under management, the fund faces virtually no risk of closure, while its 0.02% expense ratio translates into just $2 of annual fee drag for every $10,000 invested.
Outperforming SWPPX’s benchmark, the S&P 500, has proven remarkably difficult. According to the S&P Indices Versus Active (SPIVA) Scorecard, 89.9% of actively managed U.S. large-cap funds underperformed the S&P 500 over the 15-year period ending December 2025. A low 3% annual portfolio turnover rate also helps SWPPX reduce the size of potential year-end capital gains distributions.
Schwab 1000 Index Fund (SNXFX)
Many investors assume the S&P 500 simply owns the 500 largest U.S. companies, but its methodology is more selective. While market capitalization is an important factor, the index also considers liquidity and earnings consistency, with a committee making the final decisions on which companies are added or removed. Investors seeking broader, more rules-based exposure may prefer SNXFX instead.
SNXFX tracks Schwab’s proprietary index of the 1,000 largest U.S. companies by market capitalization. The fund charges a modest 0.05% expense ratio while maintaining excellent tax efficiency thanks to a turnover rate of just 3%. Despite holding twice as many stocks as the S&P 500, it still has similar sector exposure and top holdings, making it a straightforward way to gain exposure to the U.S. equity market.
Schwab U.S. Large-Cap Growth Index Fund (SWLGX)
“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 investors using taxable brokerage accounts, a passive growth index fund such as SWLGX may offer attractive tax efficiency with a low 0.035% expense ratio.
Growth companies typically reinvest profits back into the business rather than paying large dividends, and SWLGX reflects this with a relatively modest 0.4% distribution yield. The fund’s passive approach also keeps portfolio turnover lower than active growth funds, at 16%, meaning fewer securities are sold each year. Lower turnover generally reduces the likelihood of taxable year-end capital gains distributions.
Schwab Fundamental Emerging Markets Equity Index Fund (SFENX)
“If you want niche equity exposure (e.g., international, emerging markets, private markets or specific themes), you may want additional complementary funds,” Schulman says. Emerging markets in particular can be difficult to access through individual stocks, because many companies in countries such as China and India are not always listed in the U.S. or available as American depositary receipts.
One solution is SFENX, which tracks the RAFI Fundamental High Liquidity Emerging Markets Index. Rather than weighting companies solely by market capitalization, the index also considers measures such as book value, cash flow, five-year average sales, and shareholder yield through dividends and buybacks. The fund carries a higher 0.39% expense ratio than a traditional market-cap-weighted index fund.
Schwab Fundamental International Equity Index Fund (SFNNX)
Emerging markets are only one aspect of the international investing universe. The other consists of developed markets such as Japan, the UK, France, Germany, Switzerland and Australia. Investors seeking broader overseas diversification may therefore view SFNNX as a complement to SFENX. This Charles Schwab fund is also slightly more affordable, at a 0.25% expense ratio.
SFNNX tracks the RAFI Fundamental High Liquidity Developed ex U.S. Large Index, which weights companies using measures such as adjusted sales, retained operating cash flow, and shareholder yield through dividends and buybacks rather than market capitalization alone. The methodology results in greater exposure to old economy sectors such as financials and industrials instead of technology.
Schwab Fundamental U.S. Large Company Index Fund (SFLNX)
Some investors worry that the S&P 500 has become too top-heavy in 2026, with the Magnificent Seven accounting for an outsized share of the index, a heavy technology sector weighting and valuations well above historical averages. Investors seeking to sidestep those concerns while remaining invested in large-cap U.S. equities may find the SFLNX appealing as an alternative core holding.
SFLNX tracks the RAFI Fundamental High Liquidity U.S. Large Index, using a similar stock selection and weighting approach as SFENX and SFNNX rather than traditional market-cap weighting. Morningstar classifies the fund as large-value rather than the large-blend style typical of S&P 500 index funds, with technology comprising a more modest 21.5% of assets. The trade-off is a higher 0.25% expense ratio.
Schwab Small-Cap Equity Fund (SWSCX)
The size premium refers to the historical tendency for small-cap stocks to outperform large-cap stocks over long periods. While that relationship largely disappeared during the technology-led rally of the past decade, it remains a viable tilt for contrarian investors expecting leadership to broaden. SWSCX offers small-cap exposure and has historically outperformed the Russell 2000 Index.
However, the trade-offs are significant. SWSCX charges a relatively high 1.09% expense ratio because it is actively managed rather than index based. It also has a very high 108% turnover rate, increasing both internal trading costs and the potential for sizable year-end capital gains distributions. With a beta of 1.2, this fund has historically been about one-fifth more volatile than the S&P 500.
More from U.S. News
7 of the Best Long-Term Stocks to Buy
7 Best Semiconductor ETFs to Buy for 2026
6 of the Best AI ETFs to Buy for 2026
7 of the Best Charles Schwab Mutual Funds originally appeared on usnews.com
Update 07/02/26: This story was previously published at an earlier date and has been updated with new information.