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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
If you’re the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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 sponsored by Charles Schwab. It has amassed assets over $232.74 million, making 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
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.
Operating expenses on an annual basis are 0.25% for this ETF, which makes it one of the cheaper products in the space.
It’s 12-month trailing dividend yield comes in at 2.46%.
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.
For FNDB, it has heaviest allocation in the Information Technology sector –about 19.60% of the portfolio –while Financials and Healthcare round out the top three.
Looking at individual holdings, Apple Inc Common Stock Usd.00001 (AAPL) accounts for about 5.64% of total assets, followed by Microsoft Corp Common Stock Usd.00000625 (MSFT) and Exxon Mobil Corp Common Stock (XOM).
FNDB’s top 10 holdings account for about 18.91% of its total assets under management.
Performance and Risk
The ETF has lost about -7.67% and is up roughly 5.62% so far this year and in the past one year (as of 08/06/2020), respectively. FNDB has traded between $26.60 and $43.02 during this last 52-week period.
The ETF has a beta of 1.07 and standard deviation of 22.57% for the trailing three-year period, making it a medium risk choice in the space. With about 1661 holdings, it effectively diversifies company-specific risk.
Alternatives
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 SP U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Invesco High Yield Equity Dividend Achievers ETF has $645.06 million in assets, iShares Core SP U.S. Value ETF has $6.37 billion. 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.
Bottom Line
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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