Launched on 08/13/2013, the Schwab Fundamental U.S. Broad Market Index ETF (FNDB - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Value 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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
Managed by Charles Schwab, FNDB has amassed assets over $267.47 M, making it one of the average sized ETFs in the Style Box - All Cap Value. FNDB seeks to match the performance of the Russell RAFI US Index before fees and expenses.
The Russell RAFI US Index measures the performance of the constituent companies by fundamental overall company scores.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.25% for this ETF, which makes it one of the cheaper products in the space.
It's 12-month trailing dividend yield comes in at 2.32%.
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.
Representing 15.90% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Industrials round out the top three.
When you look at individual holdings, Apple Inc Common Stock Usd.00001 (AAPL - Free Report) accounts for about 3.39% of the fund's total assets, followed by Exxon Mobil Corp Common Stock (XOM - Free Report) and At+t Inc Common Stock Usd1.0 (T - Free Report) .
Its top 10 holdings account for approximately 18.15% of FNDB's total assets under management.
Performance and Risk
The ETF has added roughly 10.03% and is up about 1.00% so far this year and in the past one year (as of 05/30/2019), respectively. FNDB has traded between $31.73 and $40.14 during this last 52-week period.
The fund has a beta of 1 and standard deviation of 11.86% for the trailing three-year period, which makes FNDB a medium risk choice in this particular space. With about 1652 holdings, it effectively diversifies company-specific risk.
Schwab Fundamental U.S. Broad Market Index ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
Invesco High Yield Equity Dividend Achievers ETF (PEY - Free Report) tracks NASDAQ US Dividend Achievers 50 Index and the iShares Core S&P U.S. Value ETF (IUSV - Free Report) tracks S&P 900 Value Index. Invesco High Yield Equity Dividend Achievers ETF has $800.59 M in assets, iShares Core S&P U.S. Value ETF has $5.26 B. PEY has an expense ratio of 0.54% and IUSV 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 - All 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.