Financial Planning Blog

Good news for passive investors! Charles Schwab has significantly improved its line-up of passively managed stock index funds by lowering their management fees (net expense ratios) and simplifying their share classes. These are big reductions and come at a time when many fund companies (even Vanguard) have been raising their expense ratios. These moves make the Schwab index funds a very sensible choice for your core stock holdings, if your account is at Schwab and you can buy these funds with no transaction fee.

The table below summarizes the expense ratio reduction on the Schwab funds. The company will also be combining their investor and select share classes into single share class with a minimum investment of only $100. This means investors will not have to have the $50,000 minimum investment previously required for select shares in order to receive the lower expense ratios. Schwab has taken a big step forward in making it easy for smaller investors to benefit from low cost, passive investing.

In the past I was frustrated with Schwab’s high cost index funds and chose to use ETFs from iShares and Vanguard in my Schwab account instead. That shouldn’t be necessary anymore. In later postings I will compare these Schwab index funds with those from other leading fund companies.