A smart beta exchange traded fund, the Schwab Fundamental U.S. Broad Market Index ETF (FNDB) debuted on 08/13/2013, and offers broad exposure to the Total Market (U.S.) ETFs category of the U.S. equity 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by Charles Schwab. FNDB has been able to amass assets over $270.07 M, making it one of the larger ETFs in the Total Market (U.S.) ETFs. 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for FNDB are 0.25%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.95%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
FNDB's heaviest allocation is in the Information Technology sector, which is about 15.90% of the portfolio. Its Energy and Financials round out the top three.
Looking at individual holdings, Exxon Mobil Corp Common Stock (XOM) accounts for about 3.44% of total assets, followed by Apple Inc Common Stock Usd.00001 (AAPL) and Chevron Corp Common Stock Usd.75 (CVX).
FNDB's top 10 holdings account for about 17.9% of its total assets under management.
Performance and Risk
So far this year, the ETF has added about 1.07%, and was up about 14.29% in the last one year (as of 05/15/2018). FNDB has traded between $33.05 and $39.64 in the past 52-week period.
FNDB has a beta of 0.99 and standard deviation of 12.63% for the trailing three-year period, which makes the fund a medium choice in the space. With about 1541 holdings, it effectively diversifies company-specific risk.
Schwab Fundamental U.S. Broad Market Index ETF is an excellent option for investors seeking to outperform the Total Market (U.S.) ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
PowerShares High Yield Equity Dividend Achievers Portfolio (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. PowerShares High Yield Equity Dividend Achievers Portfolio has $766.23 M in assets, iShares Core S&P U.S. Value ETF has $3.62 B. PEY has an expense ratio of 0.54% and IUSV charges 0.05%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Total Market (U.S.) ETFs.
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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Apple Inc. (AAPL) : Free Stock Analysis Report
PWRSH-HY EQ DV (PEY): ETF Research Reports
ISHARS-CR USV (IUSV): ETF Research Reports
Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
SCHWAB-F US BMI (FNDB): ETF Research Reports
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