3 Dirt-Cheap, Gold-Rated Schwab ETFs to Buy

Investing has never been as easy, or as cost-friendly, as it is today.

We no longer need to sweat things like account fees or commissions because many brokers don't even bother to charge them anymore. That leaves us with precious few difficult choices left on our plate, among them deciding which of several low-cost fund providers we want to provide the foundation of our investing accounts.

“Oh no! My lobster is too buttery and my steak is too juicy!”

Today, I'm going to look at a few of the best Schwab ETFs to buy right now. Schwab doesn't have the largest of lineups, but its ETFs are well-rated and typically charge very low fees.

Disclaimer: This article does not constitute individualized investment advice. Individual securities, funds, and/or other investments appear for your consideration and not as personalized investment recommendations. Act at your own discretion.

The Best Schwab ETFs to Buy Now

I'm writing this article about the best Schwab ETFs to buy if you're trying to address basic portfolio needs across stocks and bonds.

I say that so you understand this isn't an exhaustive list of every fund you'd want for, say, swing trading or day trading. It's just a smart place to start if you want to build a buy-and-hold portfolio using Schwab ETFs.

In addition to important data information such as dividend yield and expense ratio, I've listed Morningstar's Medalist and Star ratings for each ETF. Morningstar's Medalist rating is a forward-looking analytical view of the fund, while Morningstar's Star rating is a backward-looking view that measures a fund's risk-adjusted return vs. its peers. Every fund on this list has a minimum Medalist rating of Silver and Star rating of 3 (out of 5).

The following are a handful of selections from our full list of the best Schwab ETFs to buy now.

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Schwab U.S. Dividend Equity ETF

• Style: U.S. dividend stock
• Assets under management: $94.9 billion
• Dividend yield: 3.3%
• Expense ratio: 0.06%, or 60¢ annually on a $1,000 investment
• Morningstar Medalist rating: Gold
• Morningstar Star rating: 4 stars

Not all equity returns come from stock prices increasing—dividends often play an important role, too.

Dividends are cash payments that companies make to its shareholders. They're a vital source of return for stocks, especially when prices are flat or down. They can be reinvested to compound your returns over time (over longer time periods, dividends have accounted for roughly 40% to 50% of equity returns). And once you hit retirement, that investment income can be used to pay your regular bills.

While you could try to get that exposure by picking individual dividend stocks, you could also diversify your risk across hundreds of payers via a dividend ETF like the Schwab U.S. Dividend Equity ETF (SCHD).

This Schwab index ETF holds around 100 dividend stocks selected for their high yields, track records of consistent dividend payments, and relative strength of their financial fundamentals. Specifically, SCHD requires its components to have paid dividends for at least 10 consecutive years, and it measures them based on yield, five-year dividend growth rate, return on equity (RoE), and free cash flow (FCF)/total debt.

Related: 10 Best Schwab Mutual Funds You Can Buy [Low Fees, $1 Minimums]

Schwab U.S. Dividend Equity ETF skews large-cap, at about 75% of the portfolio, but mids are decently represented at roughly 20% of assets. Small companies occupy the remaining sliver. The fund also holds a number of Dividend Aristocrats—companies that have raised their dividends on an annual basis for at least 25 consecutive years—such as Chevron (CVX) and PepsiCo (PEP). And it even holds a few Dividend Kings (50-plus years) including Coca-Cola (KO) and Procter & Gamble (PG). These stocks help SCHD throw off a sizable annual yield of well more than 3% currently, which is more than triple what you'd earn from holding an S&P 500 fund.

"Schwab U.S. Dividend Equity ETF stands out for its sensible, transparent, and defensive approach," Morningstar Associate Analyst Brian Paoli says. "The Dow Jones US Dividend 100 Index, which this fund tracks, includes 100 stocks that have a proven track record of dividend growth and stability. By requiring a minimum of 10 years of uninterrupted dividends and five years of stable dividend growth, the index has naturally favored stocks that have a healthy financial history."

This all makes SCHD one of the best Schwab ETFs to buy if you want much higher-than-average yield while still paying a low fee.

Related: 8 Best High-Yield Dividend ETFs for Income-Hungry Investors

Schwab Fundamental U.S. Large Company ETF

• Style: U.S. large-cap value stock
• Assets under management: $25.3 billion
• Dividend yield: 1.5%
• Expense ratio: 0.25%, or $2.50 annually on a $1,000 investment
• Morningstar Medalist rating: Gold
• Morningstar Star rating: 5 stars

Typically on the opposite side of growth stocks are value stocks: companies that the market is somehow undervaluing, based on one or more metrics, with the expectation that buyers will recognize that value and send shares higher.

Unlike many value ETFs that rank stocks by market cap, Schwab Fundamental U.S. Large Company ETF (FNDX) marches to the beat of its own drummer. From Schwab: "It selects, ranks, and weights securities by fundamental measures of company size—adjusted sales, retained operating cash flow, and dividends plus buybacks—rather than market capitalization."

Related: UBS: Micron (MU) Could More Than Double From Here

Schwab Fundamental U.S. Large Company ETF currently holds 735 stocks, 60% of which are invested in large caps. That means you're also getting significant exposure to mid-caps (30%) and a little exposure to smalls (10%). Top sectors include technology, financial services, healthcare, communication services, and energy, all of which enjoy double-digit weightings at the moment.

There's nothing special about that. Where FNDX's selection process shines is that it boasts equivalent (and sometimes even better) valuation metrics compared to SCHV, as well as superior performance over time.

To wit, Schwab Fundamental U.S. Large Company ETF has outperformed Schwab U.S. Large-Cap Value ETF (SCHV) over every meaningful time frame since inception in 2013. Meanwhile, as I write this, FNDX's portfolio price-to-earnings (P/E), price-to-book (P/B), price-to-sales (P/S), and price-to-cash flow (P/CF) are all lower than SCHV. That makes it one of the best (if not the best) Schwab ETFs to buy if you're looking too add a value strategy to your portfolio.

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Schwab U.S. Aggregate Bond ETF

• Style: U.S. intermediate core bond
• Assets under management: $10.3 billion
• SEC yield: 4.3%*
• Expense ratio: 0.03%, or 30¢ annually on a $1,000 investment
• Morningstar Medalist rating: Gold
• Morningstar Star rating: 3 stars

Investors are also told to allocate some of their nest egg to bonds, which serve a very different purpose than stocks.

With stocks, price changes are the primary driver of returns—you can receive dividend income, too, but in general, you're expected to get more performance from the stock growing in value. But bonds tend to be much less volatile and mostly trade around a "par" value. Instead, their performance largely comes from the interest income they generate. As a result, younger investors are told to invest almost exclusively in stocks, then slowly raise their allocation to bonds as they get older, as they shift from wealth creation to wealth preservation.

Related: Buy 'The Future': 5 Tech Stock ETFs You Should Own in 2026

You could hold individual bonds, but they're even more difficult to assess than stocks, and it's much more difficult to find publicly available information and analysis on them. So, many investors buy a bond fund instead and let a fund manager or index do the heavy lifting.

The Schwab U.S. Aggregate Bond ETF (SCHZ), for instance, gets you under a vast umbrella of more than 12,200 bonds and other debt securities in just one click. It's a diversified portfolio largely made up of U.S. Treasury bonds, corporate bonds, and mortgage-backed securities, all of which have earned ratings within the "investment-grade" spectrum of debt. SCHZ's holdings also span a wide number of maturities, from just a few months to more than 20 years.

Schwab U.S. Aggregate Bond ETF has a portfolio duration of 5.8 years. Duration is a measure of interest-rate risk—in this ETF's case, a duration of 5.8 years implies that if interest rates fell by a percentage point, SCHZ's price would enjoy a short-term improvement of 5.8% (and vice versa). Remember: Bond prices and interest rates have an inverse relationship.

If you're building a basic portfolio, SCHZ is one of the best Schwab ETFs to buy to get essential debt exposure. It's is not a scintillating fund (few bond funds are!), but it offers a moderate level of income for a moderate amount of risk. 

* SEC yield reflects the interest earned across the most recent 30-day period. This is a standard measure for funds holding bonds and preferred stocks.

Related: The 10 Best Vanguard Index Funds You Can Buy

Learn More About These and Other Funds With Morningstar Investor

If you're buying a fund you plan on holding for years (if not forever), you want to know you're making the right selection. And Morningstar Investor can help you do that.

Morningstar Investor provides a wealth of information and comparable data points about mutual funds and ETFs—fees, risk, portfolio composition, performance, distributions, and more. Morningstar experts also provide detailed explanations and analysis of many of the funds the site covers.

With Morningstar Investor, you'll enjoy a wealth of features, including Morningstar Portfolio X-Ray®, stock and fund watchlists, news and commentary, screeners, and more. And you can try it before you buy it. Right now, Morningstar Investor is offering a free seven-day trial and a discount on your first year's subscription when you use our exclusive link.