5 Best Schwab Bond Funds to Buy
Brokerage Charles Schwab has been expanding its offerings in the fixed-income fund space. Schwab manages three taxable bond mutual funds, three tax-free bond funds and 12 bond exchange-traded funds (ETFs). That number includes the Schwab Core Bond ETF (ticker: SCCR), which launched in January and has accumulated $180 million in total assets. SCCR pays a 30-day SEC yield of 4.4%.
[Sign up for stock news with our Invested newsletter.]
It’s the company’s second actively managed bond ETF, following the successful launch of its first, the Schwab Ultra-Short Income ETF (SCUS). That ETF attracted $32.7 million in inflows in the past six months. Its assets under management now total $88 million, and it yields 4.3%.
Here’s a look at five of Schwab’s most popular low-cost fixed-income funds, which are all currently cheaper than SCCR and SCUS, with expense ratios of 0.16% and 0.14%, respectively:
| Schwab Bond Fund | 30-Day SEC Yield* | Expense Ratio |
| Schwab U.S. Aggregate Bond Index Fund (SWAGX) | 4.34% | 0.04% |
| Schwab Short-Term Bond Index Fund (SWSBX) | 4.07% | 0.06% |
| Schwab U.S. TIPS ETF (SCHP) | 6.19% | 0.03% |
| Schwab High Yield Bond ETF (SCYB) | 7.59% | 0.03% |
| Schwab Intermediate-Term U.S. Treasury ETF (SCHR) | 4.04% | 0.03% |
*Source: Charles Schwab Asset Management, as of May 13.
Schwab U.S. Aggregate Bond Index Fund (SWAGX)
This mutual fund is available in many employer-sponsored plans, such as 401(k)s. Its stated minimum investment is $1, making this fund accessible to those starting out with only small contributions. It holds domestic investment-grade bonds with an average duration of 5.96 years, and it pays a 30-day SEC yield of 4.3%. It’s also very affordable, with an expense ratio of 0.04%. SWAGX has a total return of 4.4% over the past year, which matches its benchmark and runs slightly ahead of the category average.
It’s a conventional core holding for traditional fixed-income portfolios, says Andrew Constantinides, an investment advisor representative at Neil Jesani Wealth Management in Sunrise, Florida. “That said, it mirrors the weaknesses of the asset class today, namely interest rate sensitivity and modest yield potential relative to inflation and volatility,” he says.
He says other fixed-income instruments, such as private credit or buffered structured notes, may enhance yield without necessarily increasing risk.
Schwab Short-Term Bond Index Fund (SWSBX)
Short-term bonds are less risky than longer-term fixed-income instruments, as they have less sensitivity to interest-rate changes. In exchange, they have a lower return. That said, SWSBX has returned 5.7% over the past year as of May 14.
This fund tracks the Bloomberg U.S. Government/Credit 1–5 Year Index, investing in short-term U.S. government and investment-grade corporate bonds. It has a low expense ratio of just 0.06%. Its 30-day SEC yield is 4.1%.
This fund has an effective duration of 2.61 years. That means its price would likely rise or fall by about 2.61% if interest rates move up or down by 1%, and it would take an investor about that long to recoup the principal through interest payments.
“It’s suited for conservative investors aiming for income with lower interest rate risk or those looking for a short-term investment to put funds they may need in the near future,” says Christopher Johns, founder and wealth advisor at Spark Wealth Advisors in Jacksonville, Florida.
Schwab U.S. TIPS ETF (SCHP)
Treasury inflation-protected securities (TIPS) are Treasury bonds with principal and interest payments that are adjusted along with inflation levels. These bonds have a fixed coupon, but the interest payments are calculated based on the adjusted principal, so they also fluctuate.
This ETF has an expense ratio of 0.03%. It invests in U.S. TIPS with at least one year remaining to maturity. Right now, SCHP’s 30-day SEC yield is 6.2%, though its trailing-12-month yield is a much lower 2.9%.
Johns says this fund is suitable “if you are an investor looking to hedge against inflation, but you can’t stomach the stock market.” He adds that its risk level is moderate. “While TIPS protect against inflation, they are still subject to interest-rate risk and ultimately are not going to keep up with actual inflation,” Johns says.
Schwab High Yield Bond ETF (SCYB)
High inflation in recent years has driven demand for investments that are resilient in rising-interest-rate environments. Since its launch in July 2023, this ETF has attracted $1.1 billion in total assets. Its ultra-low expense ratio may have something to do with that, at 0.03%.
High-yield bonds, over time, outperform investment-grade bonds, but they come with higher risk, as these bonds are debt issued by companies with a higher chance of being unable to cover their liabilities. Because of the baked-in risk, investors should approach high-yield bonds with caution.
Timothy Hooker, co-founder and wealth advisor at Dynamic Wealth Solutions in Southfield, Michigan, advises investors to balance risk and reward opportunities. His firm uses this ETF, which has a 30-day SEC yield of 7.6%. “This is an incredible opportunity for income-seeking investors who need to diversify from the more vanilla aggregate bond funds,” he says.
Schwab Intermediate-Term U.S. Treasury ETF (SCHR)
This ETF, launched in 2010, has $10.5 billion in assets under management. It tracks the performance of the Bloomberg U.S. Treasury 3-10 Year Index, with holdings that have $300 million or more in outstanding face value. Its expense ratio is low, at 0.03%, similar to other Schwab index funds.
This ETF’s 30-day SEC yield is 4%, reflecting its lower level of risk. However, as with other fixed-income instruments, this fund’s value declined in the past four years as interest rates rose. It has one-month net inflows of $121.1 million, a relatively small amount for a fund of this size, although it’s not out of the ordinary to see a month with that level of investment.
This ETF, which distributes income monthly, is suitable for conservative to moderate investors, such as retirees or those nearing retirement. It can serve as a portfolio diversifier by mitigating the volatility of stocks, and adding capital preservation along with yield. It’s also less volatile than longer-term bonds.
More from U.S. News
5 Best Schwab ETFs to Buy in 2025
5 Best Schwab Money Market Funds
Fidelity vs. Schwab: Which Is the Right Choice for You?
5 Best Schwab Bond Funds to Buy originally appeared on usnews.com