Making its debut on 08/13/2013, smart beta exchange traded fund Schwab Fundamental U.S. Broad Market Index ETF (FNDB) provides investors broad exposure to the Style Box - All Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is managed by Charles Schwab (NYSE:SCHW), and has been able to amass over $253.29 million, which makes it one of the larger ETFs in the Style Box - All Cap Value. This particular fund 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.25%, making it one of the cheaper products in the space.
The fund has a 12-month trailing dividend yield of 2.37%.
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.
For FNDB, it has heaviest allocation in the Information Technology sector --about 18.50% of the portfolio --while Financials and Industrials round out the top three.
Looking at individual holdings, Apple Inc (NASDAQ:AAPL) Common Stock Usd.00001 (AAPL) accounts for about 6.56% of total assets, followed by Microsoft Corp Common Stock Usd.00000625 (MSFT) and Exxon Mobil Corp Common Stock (XOM).
The top 10 holdings account for about 19.22% of total assets under management.
Performance and Risk
Year-to-date, the Schwab Fundamental U.S. Broad Market Index ETF has added about 5.53% so far, and is up about 7.95% over the last 12 months (as of 11/30/2020). FNDB has traded between $26.60 and $44.07 in this past 52-week period.
The fund has a beta of 1.07 and standard deviation of 23.47% for the trailing three-year period, which makes FNDB a medium risk choice in this particular space. With about 1651 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 S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Invesco High Yield Equity Dividend Achievers ETF has $721.84 million in assets, iShares Core S&P U.S. Value ETF has $7.34 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 (NASDAQ:MSFT): Free Stock Analysis Report
Exxon Mobil Corporation (NYSE: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 S&P U.S. Value ETF (IUSV): ETF Research Reports
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