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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Charles Schwab. FNDB has been able to amass assets over $280.25 M, making it one of the average sized ETFs in the Style Box - All Cap Value. This particular fund, before fees and expenses, 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining 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 2.23%.
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.
Representing 16.90% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Industrials round out the top three.
Taking into account individual holdings, Apple Inc Common Stock Usd.00001 (AAPL) accounts for about 3.79% of the fund's total assets, followed by Exxon Mobil Corp Common Stock (XOM) and Microsoft Corp Common Stock Usd.00000625 (MSFT).
FNDB's top 10 holdings account for about 18.01% of its total assets under management.
Performance and Risk
The ETF return is roughly 15.91% and was up about 0.68% so far this year and in the past one year (as of 08/09/2019), respectively. FNDB has traded between $31.73 and $40.14 during this last 52-week period.
The fund has a beta of 1.01 and standard deviation of 11.79% for the trailing three-year period, which makes FNDB a medium risk choice in this particular space. With about 1642 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 $841.25 M in assets, iShares Core S&P U.S. Value ETF has $5.67 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 Fundamental U.S. Broad Market Index ETF (FNDB): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : 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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