Making its debut on 08/13/2013, smart beta exchange traded fund Schwab Fundamental U.S. Broad Market Index ETF (FNDB) provides investors broad exposure to the Style Box - All Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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
The fund is managed by Charles Schwab, and has been able to amass over $279.23 M, which makes 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.25%, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 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.
For FNDB, it has heaviest allocation in the Information Technology sector --about 16.60% of the portfolio --while Financials and Industrials round out the top three.
When you look at individual holdings, Apple Inc Common Stock Usd.00001 (AAPL) accounts for about 3.67% 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 18.28% of its total assets under management.
Performance and Risk
The ETF has added about 14.83% and was up about 6.45% so far this year and in the past one year (as of 05/08/2019), respectively. FNDB has traded between $31.73 and $40.14 during this last 52-week period.
The ETF has a beta of 1 and standard deviation of 11.73% for the trailing three-year period, making it a medium risk choice in the space. With about 1656 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.
Vanguard U.S. Value Factor ETF (VFVA) tracks ---------------------------------------- and the RiverFront Dynamic US Dividend Advantage ETF (RFDA) tracks N/A. Vanguard U.S. Value Factor ETF has $55.96 M in assets, RiverFront Dynamic US Dividend Advantage ETF has $138.71 M. VFVA has an expense ratio of 0.13% and RFDA charges 0.52%.
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
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
RiverFront Dynamic US Dividend Advantage ETF (RFDA): ETF Research Reports
Vanguard U.S. Value Factor ETF (VFVA): ETF Research Reports
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