Schwab Target 2065 Index Fund SWYOX or...

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imbogled
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Schwab Target 2065 Index Fund SWYOX or...

Post by imbogled »

Hello all.
My 23 year old son was wondering if this fund being held in his 401k is worth the .08 fee compared to just holding Schwab's Total Stock fund with an expense ratio of .03?

The target fund is made up as follows:

Schwab US Large-Cap 49.56%
Schwab International Equity 26.04%
Schwab Emerging Markets Equity 7.51%
Schwab US Small-Cap 6.76%
Schwab US REIT 4.7%
Schwab US Aggregate Bond 4.31%
Schwab Short-Term US Treasury .16%

He has a small account in taxable which is Schwab's Total Stock Fund.

Thanks!
Doctor Rhythm
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Re: Schwab Target 2065 Index Fund SWYOX or...

Post by Doctor Rhythm »

The ER difference is irrelevant. Does he want a diversified, self-balancing portfolio that includes international stocks and a small allocation to bonds - or does he just want to only hold a US stock fund? The latter wouldn’t be appropriately for most people, but for a young person with a smaller portfolio, it isn’t unreasonable for a while.

A more apples-to-apples comparison would be a target date fund versus a 3-fund portfolio.
Last edited by Doctor Rhythm on Mon Jul 26, 2021 2:47 pm, edited 1 time in total.
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imbogled
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Re: Schwab Target 2065 Index Fund SWYOX or...

Post by imbogled »

Doctor Rhythm wrote: Mon Jul 26, 2021 2:42 pm The ER difference is irrelevant. Does he want a diversified, self-balancing portfolio that includes international stocks and a small allocation to bonds - or does he just want to hold a US stock fund? The latter wouldn’t be appropriately for most people, but for a young person with a smaller portfolio, it isn’t unreasonable for a while.
That's the way I was thinking also. That's why I boldfaced his age of 23.
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Nate79
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Re: Schwab Target 2065 Index Fund SWYOX or...

Post by Nate79 »

The 0.05% difference in ER is essentially meaningless and behavioral errors would far outweigh any expense difference. I would suggest to use the low cost target date fund and worry about more important things.
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