Launched on 08/13/2013, the Schwab Fundamental U.S. Broad Market Index ETF (FNDB) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Value category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Managed by Charles Schwab, FNDB has amassed assets over $285.06 M, making it one of the average sized ETFs in the Style Box - All Cap Value. This particular fund seeks to match the performance of the Russell RAFI US Index before fees and expenses.
The Russell RAFI US Index measures the performance of the constituent companies by fundamental overall company scores.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
With one of the cheaper products in the space, this ETF has annual operating expenses of 0.25%.
FNDB's 12-month trailing dividend yield is 2.19%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 16.50% of the portfolio. Financials and Industrials round out the top three.
Taking into account individual holdings, Apple Inc Common Stock Usd.00001 (AAPL) accounts for about 3.73% of the fund's total assets, followed by Exxon Mobil Corp Common Stock (XOM) and At+t Inc Common Stock Usd1.0 (T).
FNDB's top 10 holdings account for about 18.07% of its total assets under management.
Performance and Risk
Year-to-date, the Schwab Fundamental U.S. Broad Market Index ETF return is roughly 17.85% so far, and is up about 4.44% over the last 12 months (as of 07/18/2019). FNDB has traded between $31.73 and $40.14 in this past 52-week period.
The ETF has a beta of 1.01 and standard deviation of 11.59% for the trailing three-year period, making it a medium risk choice in the space. With about 1640 holdings, it effectively diversifies company-specific risk.
Schwab Fundamental U.S. Broad Market Index ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
Invesco High Yield Equity Dividend Achievers ETF (PEY) tracks NASDAQ US Dividend Achievers 50 Index and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Invesco High Yield Equity Dividend Achievers ETF has $852.74 M in assets, iShares Core S&P U.S. Value ETF has $5.74 B. PEY has an expense ratio of 0.54% and IUSV charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Value.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Schwab Fundamental U.S. Broad Market Index ETF (FNDB): ETF Research Reports
AT&T Inc. (T) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
iShares Core S&P U.S. Value ETF (IUSV): ETF Research Reports
Invesco High Yield Equity Dividend Achievers ETF (PEY): ETF Research Reports
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
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