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?
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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $254.92 M, this makes it one of the larger ETFs in the Style Box - All Cap Value. FNDB is managed by Charles Schwab. 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.
Operating expenses on an annual basis are 0.25% for FNDB, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 2.88%.
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.
FNDB's heaviest allocation is in the Information Technology sector, which is about 14.80% of the portfolio. Its Healthcare and Financials round out the top three.
Taking into account individual holdings, Exxon Mobil Corp Common Stock (XOM) accounts for about 3.42% of the fund's total assets, followed by Apple Inc Common Stock Usd.00001 (AAPL) and Chevron Corp Common Stock Usd.75 (CVX).
The top 10 holdings account for about 18.86% of total assets under management.
Performance and Risk
Year-to-date, the Schwab Fundamental U.S. Broad Market Index ETF has lost about -3.95% so far, and is down about -2.39% over the last 12 months (as of 12/17/2018). FNDB has traded between $35.00 and $40.14 in this past 52-week period.
The fund has a beta of 0.97 and standard deviation of 11.92% for the trailing three-year period, which makes FNDB a medium risk choice in this particular space. With about 1561 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 $719.82 M in assets, iShares Core S&P U.S. Value ETF has $4.74 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-F US BMI (FNDB): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
ISHARS-CR USV (IUSV): ETF Research Reports
PWRSH-HY EQ DV (PEY): ETF Research Reports
Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
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