Is Schwab Fundamental U.S. Broad Market Index ETF (FNDB) a Strong ETF Right Now?

The Schwab Fundamental U.S. Broad Market Index ETF (FNDB) was launched on 08/13/2013, and is a smart beta exchange traded fund designed to offer 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.

A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.

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.

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

FNDB is managed by Charles Schwab, and this fund has amassed over $236.26 million, which makes it one of the larger ETFs in the Style Box - All Cap Value. FNDB, before fees and expenses, seeks to match the performance of the Russell RAFI US Index.

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.

The fund has a 12-month trailing dividend yield of 2.60%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

For FNDB, it has heaviest allocation in the Information Technology sector --about 19.90% of the portfolio --while Financials and Healthcare round out the top three.

When you look at individual holdings, Apple Inc Common Stock Usd.00001 (AAPL) accounts for about 5.55% of the fund's total assets, followed by Microsoft Corp Common Stock Usd.00000625 (MSFT) and Exxon Mobil Corp Common Stock (XOM).

Its top 10 holdings account for approximately 19.32% of FNDB's total assets under management.

Performance and Risk

So far this year, FNDB has lost about -12.36%, and is down about -2.97% in the last one year (as of 06/23/2020). During this past 52-week period, the fund has traded between $26.60 and $43.02.

FNDB has a beta of 1.08 and standard deviation of 22.25% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 1662 holdings, it effectively diversifies company-specific risk.

Alternatives

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) tracks NASDAQ US Dividend Achievers 50 Index and the iShares Core SP U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Invesco High Yield Equity Dividend Achievers ETF has $642.40 million in assets, iShares Core SP U.S. Value ETF has $6.04 billion. PEY has an expense ratio of 0.53% 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.

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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Schwab Fundamental U.S. Broad Market Index ETF (FNDB): ETF Research Reports
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Invesco High Yield Equity Dividend Achievers ETF (PEY): ETF Research Reports
 
iShares Core SP U.S. Value ETF (IUSV): ETF Research Reports
 
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