What are the best Schwab ETFs of 2019? That is the question I hope to answer today. While not the largest, Schwab is one of the key players in the ETF industry and one of the players that consistently competes by keeping costs low. Schwab doesn’t have the breadth of offerings like competing Blackrock’s iShares but Schwab has several very compelling offerings. Schwab also offers several ETFs from other companies to fill in the gaps where Schwab does not have a product, and I have included several on this list. The best products that Schwab offers outside of their own brand commission-free are from State Street, Wisdom Tree, Invesco, and Xtrackers. All of the ETFs that I will discuss today are available commission free on Schwab’s online brokerage platform through the Schwab One Source program.
How I Selected The Best Schwab ETFs of 2019
When selecting my favorite ETFs from Schwab, there are several things that I think are important. First, the ETF has to have a high enough trading volume that it is liquid. I want it to have an average 10 day volume of at least 1 million shares per day. Second, I want the ETF to have at least $1 Billion dollars in assets so that it will have longevity and not be closed down for poor performance. Third, the fund must have low fees under 0.25% per year.
Using the Best Schwab ETFs of 2019, you can easily build a low cost ETF portfolio without needing to purchase ETFs elsewhere, although there is one area in which Schwab does fall short (spoiler: it is international bond ETFs).
Of course, you can build ETF portfolios with Fidelity (using Blackrock iShares funds) or with Vanguard using any ETF. In my opinion, the iShares available from Fidelity can simplify your purchases because there are excellent iShares ETFs in each category. Vanguard is hands down the easiest because all ETFs are available on Vanguard, even those offered by Schwab and iShares ETFs.
Here are the Best Schwab ETFs of 2019 (including One Source ETFs from partners):
US Stock ETFs
This category is a key category and should make up about half of your stock holdings in your portfolio. My favorite ETF in this category is SCHX, the large company Schwab ETF. SCHB is also a great choice, and it includes small company stocks. You will note that the Schwab small company ETF, SCHA, did not meet my screening criteria. I actually own SCHA in my portfolio and recommend it despite it not meeting my liquidity screens.
The Schwab Large Cap ETF, holding the 750 largest companies in the United States, has an expense ratio of 0.03%
The Schwab US Total Stock Market ETF, holding all of the investable companies in the United States (including small companies), with an expense ratio of 0.03%. This ETF deserves a spot on the Best Schwab ETFs of 2019 list because it allows cheap access to the entire US stock market.
The Schwab Large Cap Value ETF, holding the “value” half of all large cap stocks in the United States. This is low cost at an expense ratio of 0.04%.
Another value offering, the Schwab US Dividend ETF invests in 100 dividend paying stocks in the United States. This fund carries an expense ration of 0.07% and is one of the best dividend ETFs out there. I would not buy this ETF because I do not like dividend stock strategies.
The Invesco S&P 500 Equal Weight ETF owns equal amounts of each of the top $500 US companies. While qual waiting is not a very logical strategy, it does break with standard market capitalization strategies making it an interesting choice. At 0.2%, this fund is more expensive than the others but still an absolute bargain for a “Smart Beta” ETF.
International Stock ETFs
The Schwab Developed Country Equity ETF invests in the large company stocks of all developed countries outside of the US. This ETF has an annual fee of 0.06% and is one of the best developed country ETFs that you can buy.
The Schwab Emerging Markets Equity ETF invests in emerging market stocks around the globe while avoiding the highly risky frontier markets. At a low fee of 0.13%, this is a steal when it comes to accessing emerging markets. It definitely deserves a spot on the Best Schwab ETFs of 2019 list.
US Bond ETFs
US bond ETFs should make up the core fixed income portion of your portfolio because it has no exchange rate exposure when compared to international bonds. American bond returns are also quite high when compared to other developed country bonds yields. Even though the US Aggregate Bond Market ETF, SCHZ, did not make the cut, you may want to utilize it because of its broad exposure. I own SCHZ in my own account because of its broader holdings even though it did not make it as a Best Schwab ETF of 2019.
State Street’s Floating Rate Investment grate Note ETF is an excellent corporate bond ETF that floats with the federal funds rate. It has a low expense ratio of 0.15%.
The Extrackers High Yield Corporate Bond ETF invests in the US high yield bond market and has a low expense ratio of 0.2%. While an excellent fund, its high yield strategy introduces higher credit risk.
The Wisdom Tree Floating Rate Treasury ETF has grown rapidly in recent months and invests solely in floating rate treasuries, meaning that it should remain more stable in rising and lowering interest rate environments. It’s low fee of 0.15% is very attractive.
The Schwab Short-Term US Treasury ETF invests in treasuries of 1-3 years. It has a low 0.06% expense ratio and is an excellent fund that tends to maintain its value due to its shorter duration.
The State Street Long Term Treasury ETF invests in treasuries with at least 10 years or more remaining, making the ETF quite sensitive to interest rate changes. At a low fee of 0.06%, it is an excellent long term bond holding.
International Bond ETFs
Schwab severely lacks in a high quality international bond ETF without currency risk exposure. Basically, I am always looking for something like BNDX (from Vanguard) or IAGG (from iShares). Sadly, Schwab does not have any fund that fills this role in its commission free category. It also does not have a good emerging market bond ETF. The closest offering at Schwab is PCY, although that fund is generally expensive and not as good as the comparable iShares or Vanguard offerings, EMB and VWOB. Schwab also offers several expensive developed market bond ETFs which I think you should avoid.
The Best Schwab ETFs of 2019 Portfolio
If you use Schwab, stick to the commission free ETFs from Schwab and One Source. Schwab has even more ETFs than on this list, but some of the others are still quite small and not traded nearly enough for me to recommend. Also, international Bond ETFs at Schwab are lacking when compared to the offerings from iShares and Vanguard. Specifically, I like IAGG, EMB, BNDX, and VWOB. I will not go into detail on these today, but these 4 are excellent broad bond market ETFs. Despite that, I am not a fan of international bond ETFs. Right now, developed market bonds have such low yield coupled with high principal risk and emerging market bonds are simply very risky. Because of this, I still recommend Schwab as a good investing platform.
The Global Portfolio based on the Best Schwab ETFs of 2019
A model portfolio would probably look something like this:
|SCHB||Schwab US Total Stock Market||40%|
|SCHF||Schwab Developed Country Stocks||30%|
|SCHE||Schwab Emerging Market Stocks||10%|
|SPTL||State Street US Long Term Treasuries||10%|
|SCHO||Schwab US Short Term Treasuries||5%|
|FLRN||State Street US Floating Rate Corporate Notes||5%|
I would of course recommend instead using broad ETFs for the bond section of your portfolio and also including some international bonds, but unfortunately Schwab does not offer any that pass my quality screens commission-free. Still, this bond setup will provide both short, long, and corporate exposures at a very reasonable cost. I feel quite satisfied that Schwab provides the building blocks to make an excellent portfolio at a low cost. Even better, it is commission-free when built with ETFs from the Best Schwab ETFs of 2019 list.
I recently wrote an article on why you should own emerging market stocks. You can find that article here.
Disclosures: I am long FLRN, SCHO, SCHE, SCHF, SCHZ, EMB, BNDX, SCHX, and SCHA.