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Is Schwab Fundamental International Small Company Index ETF (FNDC) a Strong ETF Right Now?

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Making its debut on 08/13/2013, smart beta exchange traded fund Schwab Fundamental International Small Company Index ETF (FNDC - Free Report) provides investors broad exposure to the Broad Developed World ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader 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.

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.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

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 managed by Charles Schwab. FNDC has been able to amass assets over $3.26 billion, making it one of the larger ETFs in the Broad Developed World ETFs. Before fees and expenses, FNDC seeks to match the performance of the Russell RAFI Developed ex-U.S. Small Co. Index (Net).

The Russell RAFI Developed ex US Small Company Index (Net) measures the performance of the small company size segment by fundamental overall company scores, which are created using as the universe the developed ex U.S. companies in the FTSE Global Total Cap Index.

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.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.39%.

It has a 12-month trailing dividend yield of 2.85%.

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.

When you look at individual holdings, Rolls-Royce Holdings Plc (RR.) accounts for about 0.26% of the fund's total assets, followed by Celestica Inc (CLS - Free Report) and Meritz Financial Group Inc.

FNDC's top 10 holdings account for about 2.24% of its total assets under management.

Performance and Risk

The ETF has added about 0.23% so far this year and is up roughly 11.47% in the last one year (as of 03/15/2024). In the past 52-week period, it has traded between $30.23 and $35.22.

The ETF has a beta of 0.93 and standard deviation of 16.52% for the trailing three-year period, making it a low risk choice in the space. With about 1748 holdings, it effectively diversifies company-specific risk.


Schwab Fundamental International Small 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 $67.37 billion in assets, Vanguard FTSE Developed Markets ETF has $129.34 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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