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

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

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

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.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

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.

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

Managed by Charles Schwab, FNDX has amassed assets over $10.73 billion, making it one of the larger ETFs in the Style Box - Large Cap Value. FNDX, before fees and expenses, seeks to match the performance of the Russell RAFI US Large Co. Index.

The Russell RAFI US Large Company Index measures the performance of the large 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 FNDX, making it on par with most peer products in the space.

FNDX's 12-month trailing dividend yield is 1.93%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector - about 17.10% of the portfolio. Financials and Healthcare round out the top three.

When you look at individual holdings, Apple Inc (AAPL - Free Report) accounts for about 3.55% of the fund's total assets, followed by Exxon Mobil Corp (XOM - Free Report) and Microsoft Corp (MSFT - Free Report) .

Its top 10 holdings account for approximately 19.12% of FNDX's total assets under management.

Performance and Risk

The ETF has added about 7.13% and is up roughly 0.42% so far this year and in the past one year (as of 02/08/2023), respectively. FNDX has traded between $47.76 and $59.62 during this last 52-week period.

The fund has a beta of 1.01 and standard deviation of 25.44% for the trailing three-year period, which makes FNDX a medium risk choice in this particular space. With about 725 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 $53.96 billion in assets, Vanguard Value ETF has $104.94 billion. IWD has an expense ratio of 0.18% 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.

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