Charles Schwab Corp (NYSE:SCHW) was a relatively late entrant to the exchange-traded fund arena. The first Schwab ETFs came to market in late 2009, but being late to the party hasn’t prevented the California-based brokerage giant from becoming an ETF behemoth. And the best Schwab ETFs have started to accumulate some serious asset firepower.
As of June 20, Schwab had $77.6 billion in ETF assets under management, making it the fifth-largest U.S. ETF issuer and putting it $30 billion ahead of the sixth-largest sponsor. Schwab’s ascent is due in part to its ability to challenge industry leaders when it comes to fees.
Yes, that even means Vanguard.
In fact, several Schwab ETFs are the least expensive in their respective categories.
Today, Schwab offers 21 exchange-traded funds — a comparatively small lineup relative to other major issuers. Still, Schwab lays legitimate claim to being a low-cost leader. The provider’s most expensive ETF charges 0.4% per year, or $40 on a $10,000 investment. Thrifty investors will love that 13 Schwab ETFs charge just 7 basis points per year or less!
Low fees are great, but they’re not always attached to the best funds. Good news there — some of the best Schwab ETFs are also cheaper than dirt.
Here’s a look at three of the best ETFs that Schwab has to offer.
Best Schwab ETFs: Schwab International Small-Cap Equity ETF (SCHC)
Investors have rightfully bemoaned the performance of U.S. small-cap stocks in 2017. That makes sense considering that the Russell 2000 is up about 4.5% — half of what the S&P 500 has gained year-to-date.
However, international small-caps are leaving their U.S. counterparts in the dust, a point illustrated by the Schwab International Small-Cap Equity ETF (NYSEARCA:SCHC).
This Schwab ETF is up nearly 15% year-to-date, bolstered by investors’ renewed affinity for international developed market stocks. The $1.3 billion SCHC, which tracks the FTSE Developed Small Cap ex-U.S. Liquid Index, is one of the least expensive international small-cap ETFs on the market. More importantly, it has been less volatile than the Russell 2000.
SCHC is a suitable alternative to traditional EAFE (Europe, Australasia and Far East) exposure, though investors should note that it allocates almost 17.3% to Canada — a market often highly correlated to the U.S. Japan, Canada and the U.K. combine for 51.5% of the ETF’s roster. Investors that enjoy ETFs with breadth will also like SCHC, as it boasts more than 1,800 stocks.
Best Schwab ETFs: Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE)
With the annual fee of 0.4%, the Schwab Fundamental Emerging Markets Large Company Index ETF (NYSEARCA:FNDE) is the most expensive among Schwab ETFs … but still favorably priced compared to other smart-beta emerging markets funds.
FNDE follows the fundamentally weighted Russell RAFI Emerging Markets Large Company Index, giving investors an alternative to traditional emerging markets ETFs. That also means a different look at the country level.
For example, Brazil and Russia — two of the most volatile emerging markets — combine for almost 29% of FNDE’s weight compared to just 9.5% of the MSCI Emerging Markets Index. As a result, this ETF’s three-year standard deviation — a key volatility metric — is 430 basis points higher than what is found on the MSCI Emerging Markets Index.
Still, this is one of the best Schwab ETFs to buy if you’re looking for international growth.
Best Schwab ETFs: Schwab U.S. Large-Cap Growth ETF (SCHG)
That includes the Schwab U.S. Large-Cap Growth ETF (NYSEARCA:SCHG), which is up 14% year-to-date.
Apple, Amazon and Facebook are this Scwab ETF’s three largest holdings among 423 stocks, combining for 13.6% of the fund’s weight. SCHG is typical of many growth ETFs in that it features large weights to the technology and consumer discretionary sectors, which combine to make up nearly half the fund’s assets.
Proving that fees make a difference, SCHG is up 36.2% over the past three years, compared to 35.9% for the competing Vanguard ETF, which charges 0.06% per year.
Note: All of the Schwab ETFs mentioned here can be traded commission-free by Schwab clients.
As of this writing, Todd Schriber did not hold a position in any of the aforementioned securities.