Pros & Cons
No inactivity fees.
Two platforms with no minimum or fees.
Above-average mobile app.
Large fund selection.
Commission-free stock, options and ETF trades.
High fee for transaction-fee funds.
Charles Schwab caters to investors of all stripes: Beginner investors will appreciate the company’s $0 account minimum, while the $0 commission for stock, options and exchange-traded funds will appeal to active traders. Schwab also receives high marks for its research offerings and a large selection of no-transaction-fee mutual funds.
With sophisticated tools and a robust trading platform, there’s not much to knock at Schwab.
Charles Schwab is best for:
Investors seeking no-minimum index funds.
Investors who rely on premium research.
Where Charles Schwab shines
Commissions and fund expenses: Schwab was one of a crop of brokers that dropped commissions in 2019, and now charges no commission for online trades of stocks, ETFs and options. Better yet, investors will pay zero transaction costs or loads (initial sales charges) for more than 4,000 mutual funds that are part of Schwab’s OneSource services. With its proprietary lineup of index funds and ETFs, Schwab now offers some of the lowest expense ratios.
Investment selection: Schwab really delivers with a robust array of mutual funds and ETFs. Customers benefit in two ways. First, the selection is impressive and easy to navigate. Schwab’s ETF Select List helps narrow the choices, featuring picks for the best fund in selected categories (more on this below). You can sort the list by feature, including expense ratio, Morningstar category and benchmark index. There’s also the Personalized Portfolio Builder tool, designed to help you create a diversified portfolio based on your financial goals, risk tolerance and time horizon.
Second, Schwab continues to aggressively compete on costs. There’s no minimum initial investment for Schwab’s mutual funds, and investors pay the same expense ratios on these funds regardless of the amount invested. Meanwhile, expense ratios for Schwab ETFs match or beat those from Vanguard or BlackRock.
Customer service: Like many online brokers, Schwab offers around-the-clock phone support. But the company’s chat support is just as good, and can be an easy way to get answers quickly. Schwab also has more than 350 branches (though there’s not a presence in every state), where you can attend complimentary workshops and meet with financial consultants by appointment. And Schwab has a robo-advisor offering, Schwab Intelligent Portfolios, if you want complete management.
Research: Schwab’s research offerings are hard to beat, perhaps the best available from an online broker. The company provides its own equity ratings, along with reports from Morningstar, Credit Suisse, Market Edge, Ned Davis and others. In addition to real-time news and earnings reports, the broker offers a variety of research reports and market commentary authored by in-house experts, as well as a quarterly magazine free of charge.
Schwab’s investment screeners are easy to use and let you save your screens. Select Lists, like the previously mentioned one for ETFs, are compiled by the company’s experts and released quarterly to give you a pre-screened selection of mutual funds and ETFs. The funds on the list are divided by category, so you can easily see the company’s picks for, say, large-cap stock mutual funds.
Do you have an Amazon Alexa? The virtual assistant now has a Schwab skill, which offers market updates, quotes on securities prices and updates on your watch list.
Account and investment minimums: In late 2018, Schwab reduced its account minimum from $1,000 to $0. That means the broker directly competes with other no-minimum brokers, including TD Ameritrade, and comes in lower than Fidelity.
The real highlight here, though, is that the company has removed investment minimums on all Schwab index funds. This means you can get into one of these funds even if you have a small amount of money and maintain your momentum with small, regular investments.
Trading platforms: In addition to the basic trading capabilities on Schwab’s website, the broker offers two robust trading platforms. Its premier offering is StreetSmart Edge, a customizable platform available with downloadable software or via cloud-based technology online. Schwab’s online trading platform is called Trade Source. It also has a suite of programs called StreetSmart Central, for options trading. Finally, the broker offers mobile trading, available on either the Schwab or StreetSmart Mobile apps.
Both StreetSmart and Trade Source are available to customers who opt into the broker’s trading services, with no related trade minimums or fees. These platforms provide access to research and robust tools catering to various types of traders. Basic trades can be placed on Schwab’s website, while the other platforms offer more sophisticated features.
StreetSmart Edge is designed for efficiency, with simple navigation and customization that’s designed to match your trading style. The many advanced features include robust charting tools, the ability to trade multiple securities in the same order window (and with a variety of order types), tools to monitor your market exposure and a commercial-free live stream of CNBC. The customizable features of this platform are notable, including the Balance Bar, which gives you a quick overview of your account and buying power, along with the ability to create and edit multiple trading layout. Finally, you can quickly research a symbol, view streaming market data and enter an order.
Trade Source lets traders monitor their portfolio and the markets, access research and view technical data. Trade Source features an intuitive trade ticket for stock, ETF and options orders that incorporates current market information.
Where Charles Schwab falls short
Transaction-fee funds: With Schwab’s long list of no-transaction-fee funds, it’s easy to avoid these. But if you want a fund that isn’t on that list, you’ll pay for it. The fee to buy transaction-fee funds is up to $49.95 (recently reduced from $76), which still is one of the highest charges of all the brokers NerdWallet has surveyed — although trades below $100 in principal are exempt from this fee.
Customer experience: The Schwab website has a wealth of information, but it can be difficult to track down what you need. Customers have complained about the wait time (or overall service experience) for issues requiring a specialist’s assistance. Meanwhile, some customers find the Schwab app to be lacking, including issues with fingerprint log-in, slow loading times or push notifications that aren’t useful.
That said, dissatisfied customers do have recourse thanks to Schwab’s satisfaction guarantee. Contact the broker and if your dispute meets certain criteria, Schwab will refund commission or transaction fees, generally within four weeks.
The bottom line
Schwab checks the boxes of every type of investor: Stock traders will appreciate $0 trading commissions and sophisticated platforms, research and tools; beginner and fund investors will benefit from the wide selection of inexpensive and low-minimum mutual funds and index funds. For those who want investment management, Schwab has a robo-advisor offering, Schwab Intelligent Portfolios.