Launched on 08/13/2013, the Schwab Fundamental U.S. Broad Market Index ETF (FNDB) is a smart beta exchange traded fund offering broad exposure to the Style Box – All Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by Charles Schwab, and has been able to amass over $744.94 million, which makes it one of the larger ETFs in the Style Box – All Cap Value. FNDB, 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
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 on par with most peer products in the space.
FNDB’s 12-month trailing dividend yield is 1.73%.
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.
FNDB’s heaviest allocation is in the Financials sector, which is about 19.80% of the portfolio. Its Information Technology and Industrials round out the top three.
Looking at individual holdings, Apple Inc (AAPL) accounts for about 3.44% of total assets, followed by Microsoft Corp (MSFT) and Meta Platforms Inc Class A (META).
The top 10 holdings account for about 19.22% of total assets under management.
Performance and Risk
Year-to-date, the Schwab Fundamental U.S. Broad Market Index ETF has added roughly 6.92% so far, and is up about 23.12% over the last 12 months (as of 05/29/2024). FNDB has traded between $52.56 and $66.26 in this past 52-week period.
The ETF has a beta of 1.02 and standard deviation of 16.04% for the trailing three-year period, making it a medium risk choice in the space. With about 1682 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.
Dimensional U.S. Targeted Value ETF (DFAT) tracks —————————————- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Dimensional U.S. Targeted Value ETF has $9.89 billion in assets, iShares Core S&P U.S. Value ETF has $17.16 billion. DFAT has an expense ratio of 0.28% 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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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
Dimensional U.S. Targeted Value ETF (DFAT): ETF Research Reports
Meta Platforms, Inc. (META) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
