The Schwab S&P 500 Index mutual fund (SWPPX) and the Schwab Total Stock Market Index mutual fund (SWTSX) are two of the largest mutual funds in existence. Both funds are sponsored and managed by Schwab. SWPPX and SWTSX are the core of many investor portfolios and many investors compare SWPPX vs SWTSX in order to decide which should be the foundation of their portfolio.
A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.
The Short Answer
The main difference between SWPPX and SWTSX is that SWPPX is a large- and mid-cap fund, while SWTSX is a total market fund. Despite these differences, the risk and return between these two funds is pretty close and I largely consider them interchangeable in a portfolio.
The Long Answer
Historical Performance: SWPPX vs SWTSX
SWPPX was launched on May 19, 1997, while SWTSX was launched a couple years later on June 1, 1999. Since then, SWTSX has outperformed by .35% annually. This is not a huge performance differential, but it does compound over time. The cumulative difference between the two funds since common inception is nearly 37%.
Differences between SWPPX vs SWTSX
The biggest difference between SWPPX and SWTSX is the market cap exposure of the funds. SWPPX tracks the S&P 500 index which includes mostly large-caps and some mid-caps, while SWTSX covers much more of the market by including more mid-caps and small-caps.
Both SWPPX and SWTSX hold essentially 100% stocks, so I will not dig into country exposures or market classification here. For all intents and purposes, the two funds have identical exposures.
Market Cap Exposure
SWPPX focuses on the S&P 500 index and so it mostly holds large-caps with a bit of mid-cap exposure. SWTSX tracks the broader Dow Jones U.S. Total Stock Market Index and so it owns many more mid-caps and small-caps (as of 12/31/2022). In other words, SWPPX is a large-cap vehicle, while SWTSX is a total market vehicle. That being said, due to market cap weighting, both funds are overwhelmingly influenced by the large-cap holdings.
The sector weights between SWPPX and SWTSX are nearly identical, as of 12/31/2022. The weights are within 1% for every single sector.
Many brokers and custodians still charge commissions and/or transaction fees to buy/sell mutual funds. To my knowledge, Schwab does not participate in the pay-to-play arrangements (with their competitor custodians) that would allow their mutual funds to trade for free on many platforms. So if an investor account is at Schwab, it is generally free to trade SWPPX or SWTSX.
It is worth noting that neither fund has a minimum for initial or additional investments. That being said, investors looking for free trades may want to consider an a total market ETF or large-cap ETF, rather than SWTSX or SWPPX.
Some investors may point out that the expense ratios between SWTSX and SWPPX differ. This is true, but it is also reflected in the net performance chart above. At a certain level, differences in expense ratio do not matter that much. In this case, the difference in expenses is fractions of a hundredth of a percent, so no need to compare or split hairs.
Tax Efficiency & Capital Gain Distributions
Both funds have made capital gains distributions in the past and will likely make them in the future. It is not possible to say which one will be more tax-efficient in the future. As index funds, the tax drag on both funds is very low. However, tax-sensitive taxable investors may want to consider using an ETF in lieu of either of these funds.
Final Thoughts: SWPPX vs SWTSX
Both SWPPX and SWTSX are large, core funds sponsored and managed by one of the largest asset managers in the world (Schwab). Beyond market cap exposures, the funds appear and act very similar. Long-term performance has been nearly identical. I view these two funds as essentially interchangeable and would not spend too much energy splitting hairs to decide which one is “better.”