The Schwab Fundamental U.S. Broad Market Index ETF (FNDB) made its debut on 08/13/2013, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Value category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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 $293.40 M, which makes it one of the average sized ETFs in the Style Box - All Cap Value. Before fees and expenses, FNDB seeks to match the performance of the Russell RAFI US Index.
The Russell RAFI US Index measures the performance of the constituent companies by fundamental overall company scores.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.25%, making it one of the cheaper products in the space.
FNDB's 12-month trailing dividend yield is 2.10%.
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.
Representing 17% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Industrials round out the top three.
Looking at individual holdings, Apple Inc Common Stock Usd.00001 (AAPL) accounts for about 4.61% of total assets, followed by Exxon Mobil Corp Common Stock (XOM) and At+t Inc Common Stock Usd1.0 (T).
The top 10 holdings account for about 18.44% of total assets under management.
Performance and Risk
The ETF has gained about 23.62% and is up roughly 10.61% so far this year and in the past one year (as of 11/07/2019), respectively. FNDB has traded between $31.73 and $40.79 during this last 52-week period.
The fund has a beta of 1.02 and standard deviation of 12.24% for the trailing three-year period, which makes FNDB a medium risk choice in this particular space. With about 1625 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 $902.21 M in assets, iShares Core S&P U.S. Value ETF has $6.41 B. PEY has an expense ratio of 0.53% 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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