Charles Schwab Target-Date Portfolios, Spectacularly Unspectacular

Charles-schwab-target-date-portfolios

Charles Schwab’s target-date portfolios are one-stop funds. They are exposed to between 70% to 95% stocks and 5% to 30% bonds. They can be built with just 8 ETFs. Charles Schwab’s target-date portfolios are medium and high-risk portfolios.

For the past 10 years the Schwab Target Date Index Fund 2060 portfolio returned 10.26% with a standard deviation of 16.22%. The dividend yield is 2.24. The 30-year return is 9.2%. Year to date Schwab Target Date Index Fund 2060 portfolio has returned 3.71%. Last year it returned 26.59%.

What is the return of Charles Schwab target-date portfolios?

NameAsset class countYear to dateReturn in 201910 year returnCAGR since 1989 (%)Risk levelExpense ratio
Schwab Target Date Index Fund 203084.9821.288.51%8.420.05%
Schwab Target Date Index Fund 204084.3824.139.48%8.8630.05%
Schwab Target Date Index Fund 205083.9725.7710.01%9.130.05%
Schwab Target Date Index Fund 206083.7126.5910.26%9.230.06%

How do you build the Charles Schwab target-date portfolio with ETFs?

This the allocation for Schwab Target Date Index Fund 2050.

Please refer to our best-in-class ETF page to see which ETFs we recommend to gain exposure to the asset classes.

  • 48.30% Large Cap Blend (S&P 500)
  • 6.20% Small Cap Blend
  • 4.50% Real Estate – REIT
  • 24.80% International Developed
  • 6.70% Emerging Markets
  • 8.20% Total Bond Market
  • 0.40% Short Term Govt/Corp Bond
  • 0.90% T-bills/Treasury Money Market

Who is Charles Schwab?

Charles Schwab founded his business in 1971 and is now one of the largest banks with a brokerage and an ETF business. Schwab brokerage offers to manage your portfolios according to your risk level using a number of portfolios. Schwab also offers one-fund target-date retirement funds. The Charles Schwab story is interesting in itself and is vividly described in Charles Schwab: How One Company Beat Wall Street and Reinvented the Brokerage Industry.

A man who trims himself to suit everybody will soon whittle himself away.

– Charles R. Schwab

Charles Schwab Corporation is a giant within asset management. They hold $4.04 trillion in client assets. Charles Schwab Corporation operates as a bank, wealth manager and brokerage.

The company was founded by Charles R. Schwab. His main intention was to provide low cost investing to the masses. A goal he has succeeded with and then some.

Charles Schwab (the man) has written a number of good books. I’m only going to recommend one here. It is called Charles Schwab’s New Guide to Financial Independence Completely Revised and Updated: Practical Solutions for Busy People. It deals with the hows to managing personal finances and it deals with how to invest.

When a man has put a limit on what he will do, he has put a limit on what he can do.

  • Charles R. Schwab

On a personal note, I admire Charles Schwab a great deal for his foresight and his magnitude of thinking.

Charles Schwab's New Guide to Financial Independence Completely Revised and Upda ted: Practical Solutions for Busy People

Description of Charles Schwab target-date portfolios

These portfolios are Charles Schwab’s target-date funds. They can be bought as one-fund solutions at a very cheap price.

Their portfolio composition is simple and elegant with high returns. When I dived into these I thought that they were rather unspectacular, bland and unnoteworthy. That is also their advantage. They don’t dabble in asset classes that will make them look smart – yes, I’m looking at you Goldman Sachs target-date portfolio.

They do suffer from the always-hold-bond-syndrome that so many target-date funds are afflicted with. Holding bonds for 40 years is a sub-optimal way to invest for investors. It may prevent the investor from exiting the fund due to lower drawdowns. This is a behavioral issue that I don’t see many target-date funds address.

Disclaimer: These are target-date funds. By design, their asset allocation will change over time. In general, target-date funds shift more of their assets towards bonds as you age to lower your risk. This means that the asset allocation below will have changed until we update it here at portfolioeinstein.com. You can see a graphical of the glide path below.

This information on these funds was collected in 2018.

charles-schwab-target date glidepath
Source: Charles Schwab, statutory prospectus for target-date index funds.

Asset Allocation for Charles Schwab target-date portfolios

Note: Please check the fund prospectus for the exact asset allocation and funds to use. 

If you bought these one-stop funds at Charles Schwab they would for the most part contain Schwab ETFs. We for the most part recommend Vanguard ETFs due to their cheaper cost and higher volume. Schwab ETF are very good however.

Schwab Target Date Index Fund 2030

  • 38.50% Large Cap Blend (S&P 500)
  • 3.50% Small Cap Blend
  • 3.30% Real Estate
  • 18.20% International Developed
  • 3.20% Emerging Markets 
  • 27.80% Total Bond Market
  • 2.10% Short Term Govt/Corp Bond
  • 3.40% T-bills/Treasury Money Market

Schwab Target Date Index Fund 2040

  • 44.90% Large Cap Blend (S&P 500
  • 5.10% Small Cap Blend
  • 4% Real Estate
  • 22.30% International Developed
  • 5.20% Emerging Markets
  • 15.70% Total Bond Market
  • 0.80% Short Term Govt/Corp Bond
  • 1.90% T-bills/Treasury Money Market

Schwab Target Date Index Fund 2050

  • 48.30% Large Cap Blend (S&P 500)
  • 6.20% Small Cap Blend
  • 4.50% Real Estate – REIT
  • 24.80% International Developed
  • 6.70% Emerging Markets
  • 8.20% Total Bond Market
  • 0.40% Short Term Govt/Corp Bond
  • 0.90% T-bills/Treasury Money Market

Schwab Target Date Index Fund 2060

  • 49.80% Large Cap Blend (S&P 500)
  • 6.80% Small Cap Blend
  • 4.80% Real Estate – REIT
  • 26.10% International Developed
  • 7.50% Emerging Markets
  • 4.30% Total Bond Market
  • 0.20% Short Term Govt/Corp Bond
  • 0.50% T-bills/Treasury Money Market

Check the best mutual funds and ETFs here.

How we select the right ETFs

There are a lot of ETFs out there. Most of them can be discarded because:

  • They are too expensive
  • They hold too few assets and are therefore too illiquid
  • They do not meet the criteria for representing the asset class they are supposed to mirror.

We have carefully selected an ETF for each asset class that the portfolios on portfolioeinstein.com use. If you want to read more about our selection process and see what we consider the best ETFs please visit our article What Is The Best ETF?

If you are a European investor you need to buy European ETFs. We list 47 best ETFs in our article What Are The Best ETFs For European Investors? (Here Is 47).

As of 2020 we also track socially responsible investing ESG portfolios. Socially responsible investing (ESG) portfolios prioritize investing that puts an emphasis on environmental, social and corporate governance issues.

You can find the socially responsible investing ESG ETFs in the same article.

Resources for Charles Schwab target-date portfolios

You can compare different Target Date Funds in the article What Is The Best Target Date Fund?

Get a primer on target-date-fund in our article Target Date Fund Portfolios.

Charles Schwab has a good youtube channel with lots of useful information.

Suggestions for your next steps

Finding the correct portfolio is hard. Maintaining your portfolio is also daunting. If you are still in doubt about which portfolio to choose, we suggest you read our article How To Invest Money: 5 Simple Steps That Work For Anyone

If you have already committed to a portfolio – good for you! If you need help maintaining the portfolio you will find our rebalance worksheet useful. Rebalancing your portfolio lowers your risk and may even provide higher returns in the long run.

You can find the rebalance worksheet in our article Here Is The Most Easy To Use Portfolio Rebalance Tool

Related questions

What happens to target date funds after target date?

Nothing special happens the after target date has been passed. The funds will still exist. The asset allocation at that point is, depending on the provider, 50% bonds, and 50% stocks.

Are Target Date Funds too conservative?

Some target-date funds are too conservative because they allocate too much to bonds. When you are in your 30’s and 40’s you do not need bonds in your portfolio but many target-date funds has allocations to bonds at this stage. Stocks performs better than bonds over the long-term.

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