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Is Schwab Fundamental International Large Company Index ETF (FNDF) a Strong ETF Right Now?

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Launched on 08/13/2013, the Schwab Fundamental International Large Company Index ETF (FNDF - Free Report) is a smart beta exchange traded fund offering broad exposure to the Broad Developed World ETFs 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.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide 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.

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.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Charles Schwab. It has amassed assets over $9.03 billion, making it one of the largest ETFs in the Broad Developed World ETFs. FNDF, before fees and expenses, seeks to match the performance of the Russell RAFI Developed ex US Large Co. Index (Net).

The Russell RAFI Developed ex US Large Company Index (Net) measures the performance of the large company size segment by fundamental overall company scores, which are created using as the universe the companies included in the Russell Developed ex-U.S. Index.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.25%, making it one of the cheaper products in the space.

It's 12-month trailing dividend yield comes in at 2.91%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, Shell Plc (SHEL - Free Report) accounts for about 2.67% of the fund's total assets, followed by Samsung Electronics Ltd and Totalenergies (TTE - Free Report) .

Its top 10 holdings account for approximately 12.99% of FNDF's total assets under management.

Performance and Risk

So far this year, FNDF has added roughly 6.64%, and is down about -6.31% in the last one year (as of 01/13/2023). During this past 52-week period, the fund has traded between $25.15 and $34.12.

The fund has a beta of 0.85 and standard deviation of 24.28% for the trailing three-year period, which makes FNDF a medium risk choice in this particular space. With about 962 holdings, it effectively diversifies company-specific risk.

Alternatives

Schwab Fundamental International Large Company Index ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard Total International Stock ETF (VXUS - Free Report) tracks FTSE Global All Cap ex US Index and the Vanguard FTSE Developed Markets ETF (VEA - Free Report) tracks FTSE Developed All Cap ex US Index. Vanguard Total International Stock ETF has $52.61 billion in assets, Vanguard FTSE Developed Markets ETF has $105.87 billion. VXUS has an expense ratio of 0.07% and VEA charges 0.05%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.

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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