Back to top

Image: Bigstock

Is Schwab Fundamental U.S. Large Company Index ETF (FNDX) a Strong ETF Right Now?

Read MoreHide Full Article

A smart beta exchange traded fund, the Schwab Fundamental U.S. Large Company Index ETF (FNDX - Free Report) debuted on 08/13/2013, and offers broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

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

FNDX is managed by Charles Schwab, and this fund has amassed over $10.25 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Value. This particular fund seeks to match the performance of the Russell RAFI US Large Co. Index before fees and expenses.

The Russell RAFI US Large Company Index measures the performance of the large company size segment 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.

It's 12-month trailing dividend yield comes in at 1.70%.

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.

FNDX's heaviest allocation is in the Financials sector, which is about 16.50% of the portfolio. Its Information Technology and Healthcare round out the top three.

When you look at individual holdings, Apple Inc Common Stock Usd.00001 (AAPL - Free Report) accounts for about 4.13% of the fund's total assets, followed by Exxon Mobil Corp Common Stock (XOM - Free Report) and Microsoft Corp Common Stock Usd.00000625 (MSFT - Free Report) .

FNDX's top 10 holdings account for about 18.3% of its total assets under management.

Performance and Risk

So far this year, FNDX has lost about -0.62%, and is up about 15.14% in the last one year (as of 04/01/2022). During this past 52-week period, the fund has traded between $52.49 and $59.90.

The fund has a beta of 1.03 and standard deviation of 23.58% for the trailing three-year period, which makes FNDX a medium risk choice in this particular space. With about 722 holdings, it effectively diversifies company-specific risk.


Schwab Fundamental U.S. Large Company Index ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

IShares Russell 1000 Value ETF (IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $57.90 billion in assets, Vanguard Value ETF has $101.39 billion. IWD has an expense ratio of 0.19% and VTV 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 - Large 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.

Published in