What's Schwab Doing Now?

A couple of weeks ago, I wrote about Schwab reducing their fees and account minimums on their index funds. It’s important to note (especially if you are just starting to invest) that Schwab has also lowered fees on their target-date mutual funds -- and lowered the minimum initial investment to $100.

Schwab hasn’t been known for their mutual fund family, but they are trying to make a mark. Not only are their index funds inexpensive (as I blogged a couple of weeks ago), but their target-date funds now cost roughly 40% less than the category average.

But be sure to read the fine print. They also mention that they have reduced a portion of their operating expenses to 0% through 02/27/2011 (management fees will continue to be charged). So, if you have a retirement date past 2011, then your fees will be increased.

If you’re in the market for a target-date fund, it is worth considering Schwab. But be aware the strategy behind the fee reduction is to raise assets. It appears several of their target-date funds have not attracted much attention -- or money. The low asset base for several of the funds has forced their expenses to be nearly twice the category average -- in some cases nearly 3% (hence the need to lower fees). Before you buy a target-date fund, be sure to research the options.