The Schwab Fundamental U.S. Small Company Index ETF (
FNDA Quick Quote FNDA - Free Report) was launched on 08/13/2013, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small 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.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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
FNDA is managed by Charles Schwab, and this fund has amassed over $5.21 billion, which makes it one of the largest ETFs in the Style Box - Small Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Russell RAFI US Small Co. Index.
The Russell RAFI US Small Company Index measures the performance of the small company size segment by fundamental overall company scores.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining 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.
The fund has a 12-month trailing dividend yield of 1.63%.
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.
This ETF has heaviest allocation in the Industrials sector - about 18.40% of the portfolio. Financials and Consumer Discretionary round out the top three.
Taking into account individual holdings, Diamondback Energy Inc (
FANG Quick Quote FANG - Free Report) accounts for about 0.46% of the fund's total assets, followed by First Citizens Bancshares Inc Clas ( FCNCA Quick Quote FCNCA - Free Report) and Patterson Uti Energy Inc ( PTEN Quick Quote PTEN - Free Report) .
Its top 10 holdings account for approximately 3.42% of FNDA's total assets under management.
Performance and Risk
The ETF has lost about -19.82% and is down about -13.34% so far this year and in the past one year (as of 09/23/2022), respectively. FNDA has traded between $44.28 and $57.77 during this last 52-week period.
The ETF has a beta of 1.17 and standard deviation of 30.45% for the trailing three-year period, making it a medium risk choice in the space. With about 983 holdings, it effectively diversifies company-specific risk.
Schwab Fundamental U.S. Small Company Index ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 Value ETF (
IWN Quick Quote IWN - Free Report) tracks Russell 2000 Value Index and the Vanguard SmallCap Value ETF ( VBR Quick Quote VBR - Free Report) tracks CRSP U.S. Small Cap Value Index. IShares Russell 2000 Value ETF has $11.44 billion in assets, Vanguard SmallCap Value ETF has $21.84 billion. IWN has an expense ratio of 0.23% and VBR charges 0.07%.
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 - Small 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.