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Charles Schwab Target-Date Portfolios, Spectacularly Unspectacular

Charles-schwab-target-date-portfolios

This is the article displaying the target-date index portfolios by Charles Schwab. Here you will find a description, performance, and resources for the portfolios as well as detailed information on how to implement them yourself.

Charles Schwab target-date portfolios spectacularly unspectacular

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.

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

Performance of Charles Schwab target-date portfolios

Portfolio nameAsset class count1 year return (2019)Year to date10 year returnCAGR since 1989DrawdownRisk LevelExpense ratioYield
S&P 500 (Benchmark)131.46%3.69%13.52%10.54%-37.63%5 - very high risk0.04%1.79%
Schwab Target Date Index Fund 2030821.51%1.79%8.49%8.49%-25.62%3 - medium risk0.06%2.18%
Schwab Target Date Index Fund 2040824.33%1.81%9.42%8.95%-32.48%4 - high risk0.06%2.24%
Schwab Target Date Index Fund 2050825.75%1.80%9.88%9.14%-36.08%5 - very high risk0.07%2.26%
Schwab Target Date Index Fund 2060726.63%1.81%10.16%9.27%-38.18%5 - very high risk0.07%2.27%

 

Asset Allocation for Charles Schwab target-date portfolios

Schwab Target Date Index Fund 2030

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

Schwab Target Date Index Fund 2040

  • 44.90% Large Cap Blend (S&P 500) – (VV)
  • 5.10% Small Cap Blend – (VIOO)
  • 4% Real Estate – REIT (VNQ)
  • 22.30% International Developed (VEA)
  • 5.20% Emerging Markets – (VWO)
  • 15.70% Total Bond Market – (BND)
  • 0.80% Short Term Govt/Corp Bond – (VCSH)
  • 1.90% T-bills/Treasury Money Market (BIL)

Schwab Target Date Index Fund 2050

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

Schwab Target Date Index Fund 2060

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

Check the best mutual funds and ETFs here.

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.

Conclusion

The target-date index portfolios from Schwab are simple and effective.

How would you rate the portfolios?

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