Tag Archives: Charles Schwab

Schwab 1000 Index Fund (SNXFX)

I recently received a letter from the third-party company that manages one of our 403B Plans.  It was the standard quarterly letter that provides updates on account performance, fees, and if there were any changes to the list of mutual funds available to select from.  Since we generally invest in index funds, I normally just do a quick review of the updates and move on.

There was a change mentioned in this letter that grabbed my attention.  A new mutual fund was added.  The new fund is the Schwab 1000 (SNXFX).  I have seen the Schwab 1000 (SNXFX) mentioned in various articles over the years, but have never really paid much attention to it.

Now that the Schwab 1000 (SNXFX) was presented to me as an option, I wanted to learn more about it.

History of the Schwab 1000 (SNXFX)

Charles Schwab created the Schwab 1000 (SNXFX) in 1991.  The fund was created to capture the returns of the fastest growing large and medium-sized publicly traded domestic stocks.  The Schwab 1000 (SNXFX) was created to give investors a broader index than the S&P 500.  While the S&P 500 is made up of 470 American companies, the Schwab 1000 (SNXFX) has more than twice as many companies as the S&P 500 index.

The Schwab 1000 (SNXFX) is an index fund.  When a change is made to the fund’s holdings, it is based on changes to the S&P 500.  The fund is weighted based on market capitalization.  The fund’s holding are reviewed once per year.

Performance

Is 1000 greater than 500?  Over the past 25 years, the Schwab 1000 (SNXFX) has slightly outperformed the Schwab 500 (SWPPX).  I was not surprised by that based on the fund having an allocation of mid-cap stocks.

Schwab 1000 Index (SNXFX)

  • 5-year return = 14.55%
  • 10-year return = 7.12%
  • 15-year return = 7.06%
  • 25-year return = 9.35%

Schwab 500 Index (SWPPX)

  • 5-year return = 14.66%
  • 10-year return = 6.95%
  • 15-year return = 6.69%
  • 25-year return = 9.15%

Expense Ratio

Since the Schwab 1000 (SNXFX) has slightly outperformed the S&P 500, why has this fund not received more attention by the financial media?  In my opinion, the answer to that question was based on the fund’s expense ratio. The Schwab 1000 (SNXFX) had a higher expense ratio than other index funds.

To compete with Vanguard and Fidelity, Schwab lowered the expense ratios on many of their index funds.  For most of Schwab’s index funds, the expense ratio was lowered to less than 0.10%.  To win the war of who has the lowest expense ratios, Schwab lowered the expense ratio on the Schwab 500 Index Fund (SWPPX), the Schwab Total Stock Market Index Fund (SWTSX), and the Schwab Total International Index Fund (SWISX).

Schwab did not, however, reduce the expense ratio on the Schwab 1000 (SNXFX).  That has recently changed.  The expense ratio is now 0.05%.  Prior to that decrease, the expense ratio was 0.29%.  While 0.29% is not a high expense ratio, it was much higher than a similar fund the Vanguard Large Cap Index Fund (VLACX) that has an expense ratio of 0.18%.

How does the Schwab 1000 (SNXFX) fit into an Investment Portfolio

The Schwab 1000 (SNXFX) is designed as a core holding.  It is a large-cap blend fund.  It can be used in a similar way as an S&P 500 index fund or large cap index fund.

What if an investor wants to try to approximate the total stock market?  To approximate the total stock market, an investor can match the Schwab 1000 (SNXFX) up with the Schwab Small Cap Index Fund (SWSSX) or a similar small-cap fund.  To approximate the total stock market, an investor should allocate 87% to the Schwab 1000 (SNXFX) and 13% in the Schwab Small Cap Index Fund (SWSSX).

Where Should the Schwab 1000 (SNXFX) be used 

In my situation, the Schwab 1000 (SNXFX) is offered as an investment option in a 403B plan.  The Schwab (1000) can be used in many ways.  It is a good option for people who have a limited amount of money and want to open an IRA because there is no initial minimum amount required.  This fund is also a good option for a brokerage account because the turnover is only 3% and that makes it a good tax efficient option.

Conclusion

In the 403B account that I now have the Schwab 1000 (SNXFX) as an option, I currently use the Schwab 500 Index Fund (SWPPX) for my large cap allocation.  While there is nothing wrong with the Schwab 1000 (SNXFX), I think that I am going to stick with the S&P 500 fund.  If the company that manages the 403B decides to eliminate the S&P 500 fund, I would have no problem with investing in the Schwab 1000 (SNXFX) as my large cap option.  In the meantime, I currently make up the slight difference in exposure to mid-cap stocks by approximating the total stock market with an extended market index fund and small-cap index fund.

Do you own shares of the Schwab 1000 Index Fund (SNXFX)?

Please share your thoughts about this fund in the comments section.

Please remember to check with a financial professional before you ever buy an investment and to read my Disclaimer page.

Early Retirement Portfolio & Plan

Thank you for reading part-4 in my series on asset allocation.  In my last post, I wrote about our current balanced-growth asset allocation.  That is the asset allocation that we plan on maintaining until we retire in 2028.

In this post, I will be considering the future.  This post is about how I foresee our assets being allocated at the time of retirement.  I use the word foresee because it is what I am anticipating.  As I stated in my previous post, I don’t have a crystal ball.  Nobody can predict the future, but this is what I am optimistically forecasting.

At the time of retirement, I will be age 52 and my wife will be age 60.  At age 60, my wife will draw a Pension equal to 70% of her last annual salary.  The Pension technically has a cost of living adjustment (COLA), but there has not been an adjustment in over 15 years.  Moving forward, we are not going to count on any COLA adjustments.

By 2028, we plan on having about 50 years of annual living expenses in investable assets.  To come up with that amount, I have run our figures on many different financial calculators including AARP, Charles Schwab, and Fidelity that take the future projected growth of different asset allocations into account.  The 50 years of living expenses are based on what we currently have saved, the amount we plan on adding to our savings, as well as projected market performance.

The asset allocation that we plan on using at retirement will be 50% invested in stocks and 50% invested in bonds/cash:

S&P 500 Index Fund – 32%

Extended Market Index Fund – 8%

Total International Stock Market Index Fund – 10%

Intermediate-Term Bond Fund – 32%

TIPS Fund – 10

Cash – 8%

At retirement, we are planning on withdrawing only 1.8% per year from our portfolio.  Based on the Vanguard Monte Carlo Nest Egg Calculator, our success rate is projected to be 100%.  We also have a greater than 100% projected success rate on Firecalc.com and the Trinity study.

Between the pension and withdrawing 1.8% from our portfolio, we will have $112K per year to live on.  Just based on simple math, if we are taxed at 25%, we would have $7K per month to live on.  That would be more than double of what we live on now with fewer expenses.

For the first 10 years of retirement, we plan on withdrawing from our taxable account.  When my wife is age 70, we will be forced to withdraw from her Traditional IRA because of Required Minimum Distributions (RMD).  At that point, we will still be 8 years away from having to withdraw from my Traditional IRA.  We might never have to touch our Roth IRA accounts.  If we do use our Roth IRA accounts, it might just be to withdraw extra money without causing us to go into a higher tax bracket.

We are currently planning on being flexible when it comes to Social Security.  Our goal is to take it when my wife is 70 and I am 62.  We are, however, keeping the option open to taking it early based on retiring during a prolonged market correction. Otherwise, the amount that we will collect will compound 7% annually for every year my wife waits between age 62 and 70.

For some people, this plan might seem too conservative.  For me, being a little on the conservative side is important.  That is because I am retiring at a young age.  I have to plan on being able to fund a retirement of at least 35 years for both my wife and myself.

For me, I don’t see it as being overly conservative.  I see it more as being flexible.  By only planning on a 1.8% withdrawal rate, we have a great amount of flexibility.  If we had to increase it to 2.8%, our success rate only falls to 98% on the Vanguard Monte Carlo Nest Egg Calculator.  If my wife had to work two more additional years, her pension would jump to 80% of her last annual salary.  Also, I will most likely still work part-time because I want to continue to take advantage of my catch-up contributions in my retirement accounts.

That is how our future plan looks.  It is over 11 years from now.  I don’t want to get too excited.  Between now and then, we will work hard, save, invest, take care of our health, and enjoy every day.

Also, please check out the following links from some of the top personal finance blogs to learn about the #DrawdownStrategy Chain:

Anchor: Physician On Fire: Our Drawdown Plan in Early Retirement

Link 1: The Retirement Manifesto: Our Retirement Investment Drawdown Strategy

Link 2: OthalaFehu: Retirement Master Plan

Link 3: Plan.Invest.Escape: Drawdown vs. Wealth Preservation in Early Retirement

Link 4: Freedom is Groovy: The Groovy Drawdown Strategy

Link 5: The Green Swan: The Nastiest, Hardest Problem in Finance

Link 6: My Curiosity Lab: Show Me The Money: My Retirement Drawdown Plan

Link 7: Cracking Retirement: Our Drawdown Strategy

Link 8: The Financial Journeyman: Early Retirement Portfolio & Plan

Link 9: Retire by 40: Our Unusual Early Retirement Withdrawal Strategy

Link 10: Early Retirement Now: The ERN Family Early Retirement Captial Preservation Plan

Link 11: 39 Months: Mr. 39 Months Drawdown Plan

Link 12: 7 Circles: Drawdown Strategy – Joining The Chain Gang

Link 13: Retirement Starts Today: What’s Your Retirement Withdrawal Strategy?

Link 14: Ms. Liz Money Matters: How I’ll Fund My Retirement

Link 15: Penny & Rich: Rich’s Retirement Plan

Link 16: Atypical Life: Our Retirement Drawdown Strategy

Link 17: New Retirement: 5 Steps for Defining your Retirement Drawdown Strategy

Link 18: Maximize Your Money: Practical Retirement Withdrawal Strategies Are Important

Link 19:  ChooseFI:  The Retirement Manifesto – Drawdown Strategy Podcast

Please remember to check with a financial professional before you ever buy an investment and to read my Disclaimer page.