Schwab Automatic Investing to Dollar Cost Average into the Market

https://www.thecasualcapitalist.com/investing/best-schwab-index-fund-portfolios/

00:00 Intro
00:12 Index Funds
00:46 ETFS vs Mutual Funds
01:18 Dollar Cost Averaging
01:59 Open Brokerage Account
02:19 Open Schwab Account
03:12 Setup Automatic Investing
03:55 SWPPX (S&P 500)

In this video we’re going to setup a Schwab account and buy our first index fund and then set up Automatic Investing so that we can Dollar Cost Average into the market.

If you don’t know what an index fund is, or why you want to buy one, you can click on the video here.

But basically, index funds track a popular index like the S&P 500. This way you will get the same results as the SP500 which has averaged about a 10% gain every year for the past 100 years.

Schwab has some of the lowest index fund fees coming in at only .02%. This means that for every $1000 you invest, you only need to pay $0.20! By comparison, an actively managed hedge fund typically charges around 2%!

So first, we need to open an account with Schwab. I currently have a checking and brokerage account with them and they are not paying me to make this video, I genuinely think they’re a great company.

You can use this link to open a Schwab Account (this isn’t an affiliate link and I won’t get anything):
https://www.schwab.com/open-an-account

You can also use vanguard, Fidelity etc. and the process should be pretty similar.

Now that we have our account open, we need to fund it, this is usually done by hooking up an external checking to it your Schwab Account and transferring the funds there.

Once the account is funded we have two options to buy index funds.
ETFs or Mutual Funds

ETFs or Exchange Traded Funds trade just like stocks. SCHX is Schwab’s Large Cap Fund and it tracks the top 750 US companies so it is a little bit more diversified than the SP500, but has very similar results. 1 share of SCHX is currently $46.76 and we have to buy this exact dollar amount, we can’t invest $100 into SCHX, we would need to buy two shares and the total would be $93.52

Mutual Funds trade at the end of the day and can be bought in fixed dollar amounts. For example, you can buy exactly $100 dollars’ worth and if you bought $100.00 of a mutual fund at 10am, it wouldn’t be purchased until the close of the trading fund where ETFS would be purchased instantly.

So the main advantages of mutual funds in Schwab, is that we can set up automatic investing and we can buy specific dollar amounts. This makes investing on a consistent basis a lot easier because we can just set it and forget it.

Buying the same amount once a month, means that we will dollar cost average into the market and we don’t need to worry about timing. We will buy when the market is low and when it is high. For example, if we bought $100.00 worth of SWPXX on Oct 20th at $56.81 we will have bought 1.76 shares. And if we bought $100.00 worth of SWPXX on Aug 22nd at $63.96 we would have only gotten 1.56 shares.

By buying consistently we are buying more when the market is low and less when it is high.

Automatic Investing

To setup automatic investing, we need to first by at least $1 of the mutual fund that we want. Once we have the mutual fund in our account(this will happen a couple hours after the market closes for the day), we can set up automatic investing.

This is a very simple 1 fund portfolio but if you’re interested in how to build a more complicated portfolio with US Stocks, Real Estate and International stocks, be sure to click right here.

Thanks for watching!