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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?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

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.

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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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

The fund is managed by Charles Schwab. FNDB has been able to amass assets over $422.47 million, making 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

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

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 2.01%.

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.

Representing 15.80% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Healthcare round out the top three.

Taking into account individual holdings, Apple Inc (AAPL) accounts for about 4.04% of the fund's total assets, followed by Exxon Mobil Corp (XOM) and Chevron Corp (CVX).

The top 10 holdings account for about 18.99% of total assets under management.

Performance and Risk

The ETF has lost about -12.08% so far this year and is down about -4.29% in the last one year (as of 06/29/2022). In the past 52-week period, it has traded between $49.26 and $59.23.

The fund has a beta of 1.02 and standard deviation of 24.42% for the trailing three-year period, which makes FNDB a medium risk choice in this particular space. With about 1627 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.

Dimensional U.S. Targeted Value ETF (DFAT) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Dimensional U.S. Targeted Value ETF has $6.33 billion in assets, iShares Core S&P U.S. Value ETF has $11.06 billion. DFAT has an expense ratio of 0.29% 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
 
Apple Inc. (AAPL): Free Stock Analysis Report
 
Chevron Corporation (CVX): Free Stock Analysis Report
 
Exxon Mobil Corporation (XOM): Free Stock Analysis Report
 
iShares Core S&P U.S. Value ETF (IUSV): ETF Research Reports
 
Dimensional U.S. Targeted Value ETF (DFAT): ETF Research Reports
 
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