The Schwab Fundamental U.S. Large Company ETF (FNDX) was launched on 08/13/2013, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

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.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is managed by Charles Schwab. FNDX has been able to amass assets over $17.83 billion, making it one of the largest ETFs in the Style Box - Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Russell RAFI US Large Co. Index.

The RAFI Fundamental High Liquidity US Large Index measures the performance of large U.S. companies based on their fundamental size and weight.

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 on par with most peer products in the space.

FNDX's 12-month trailing dividend yield is 1.64%.

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 FNDX, it has heaviest allocation in the Financials sector --about 19.60% of the portfolio --while Information Technology and Healthcare round out the top three.

Taking into account individual holdings, Apple Inc (AAPL) accounts for about 4.44% of the fund's total assets, followed by Microsoft Corp (MSFT) and Berkshire Hathaway Inc Class B (BRK/B).

Its top 10 holdings account for approximately 18.93% of FNDX's total assets under management.

Performance and Risk

The ETF return is roughly 21.67% and is up about 33.79% so far this year and in the past one year (as of 11/12/2024), respectively. FNDX has traded between $18.83 and $24.82 during this last 52-week period.

The fund has a beta of 0.99 and standard deviation of 15.77% for the trailing three-year period, which makes FNDX a medium risk choice in this particular space. With about 737 holdings, it effectively diversifies company-specific risk.

Alternatives

Schwab Fundamental U.S. Large Company ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

Schwab U.S. Dividend Equity ETF (SCHD) tracks Dow Jones U.S. Dividend 100 Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. Schwab U.S. Dividend Equity ETF has $65.90 billion in assets, Vanguard Value ETF has $132.41 billion. SCHD has an expense ratio of 0.06% and VTV 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 - Large 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. Large Company ETF (FNDX): ETF Research Reports

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

Vanguard Value ETF (VTV): ETF Research Reports

Schwab U.S. Dividend Equity ETF (SCHD): ETF Research Reports

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