Designed to provide broad exposure to the Small Cap Value segment of the US equity market, the Schwab Fundamental U.S. Small Company Index ETF (
FNDA Quick Quote FNDA - Free Report) is a passively managed exchange traded fund launched on 08/13/2013.
The fund is sponsored by Charles Schwab. It has amassed assets over $6.07 billion, making it one of the largest ETFs attempting to match the Small Cap Value segment of the US equity market.
Why Small Cap Value
Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.
While value stocks have lower than average price-to-earnings and price-to-book ratios, they also have lower than average sales and earnings growth rates. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however likely to underperform growth stocks in strong bull markets.
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.25%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.31%.
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 to the Industrials sector--about 19.50% of the portfolio. Consumer Discretionary and Financials round out the top three.
Looking at individual holdings, First Solar Inc (
FSLR Quick Quote FSLR - Free Report) accounts for about 0.42% of total assets, followed by Geo Group Reit Inc ( GEO Quick Quote GEO - Free Report) and Valmont Inds Inc ( VMI Quick Quote VMI - Free Report) .
The top 10 holdings account for about 2.36% of total assets under management.
Performance and Risk
FNDA seeks to match the performance of the Russell RAFI US Small Co. Index before fees and expenses. The Russell RAFI US Small Company Index measures the performance of the small company size segment by fundamental overall company scores.
The ETF has gained about 4.99% so far this year and is down about -7.01% in the last one year (as of 01/20/2023). In the past 52-week period, it has traded between $42.52 and $54.89.
The ETF has a beta of 1.17 and standard deviation of 31.37% for the trailing three-year period, making it a medium risk choice in the space. With about 976 holdings, it effectively diversifies company-specific risk.
Schwab Fundamental U.S. Small Company Index ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FNDA is a reasonable option for those seeking exposure to the Style Box - Small Cap Value area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 Value ETF (
IWN Quick Quote IWN - Free Report) and the Vanguard SmallCap Value ETF ( VBR Quick Quote VBR - Free Report) track a similar index. While iShares Russell 2000 Value ETF has $12.27 billion in assets, Vanguard SmallCap Value ETF has $24.66 billion. IWN has an expense ratio of 0.23% and VBR charges 0.07%. Bottom-Line
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
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.