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.
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.
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.
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.
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
FNDB is managed by Charles Schwab, and this fund has amassed over $297.50 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
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 FNDB are 0.25%, which makes it one of the cheaper products in the space.
The fund has a 12-month trailing dividend yield of 2.07%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 17.30% of the portfolio. Financials and Industrials round out the top three.
When you look at individual holdings, Apple Inc Common Stock Usd.00001 (AAPL) accounts for about 4.72% 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 18.59% of its total assets under management.
Performance and Risk
Year-to-date, the Schwab Fundamental U.S. Broad Market Index ETF return is roughly 25.27% so far, and was up about 12.86% over the last 12 months (as of 12/02/2019). FNDB has traded between $31.73 and $41.48 in this past 52-week period.
FNDB has a beta of 1.02 and standard deviation of 12.14% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 1633 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 $908.23 M in assets, iShares Core S&P U.S. Value ETF has $6.63 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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