The Schwab Fundamental U.S. Broad Market Index ETF (FNDB) was launched on 08/13/2013, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Value category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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
FNDB is managed by Charles Schwab, and this fund has amassed over $272.22 M, which makes it one of the larger 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
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 this ETF are 0.25%, making it one of the cheaper products in the space.
The fund has a 12-month trailing dividend yield of 2.21%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
This ETF has heaviest allocation in the Information Technology sector - about 14.50% of the portfolio. Financials and Healthcare round out the top three.
Taking into account individual holdings, Exxon Mobil Corp Common Stock (XOM) accounts for about 3.09% of the fund's 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 18.1% of its total assets under management.
Performance and Risk
The ETF return is roughly 9.10% so far this year and is down about -3.89% in the last one year (as of 02/04/2019). In the past 52-week period, it has traded between $31.73 and $40.14.
The fund has a beta of 1 and standard deviation of 12.09% for the trailing three-year period, which makes FNDB a medium risk choice in this particular space. With about 1566 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 $721.63 M in assets, iShares Core S&P U.S. Value ETF has $4.95 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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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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