Launched on 08/13/2013, the Schwab Fundamental U.S. Small Company ETF (FNDA) is a smart beta exchange traded fund offering broad exposure to the Style Box - Small 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.

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

Managed by Charles Schwab, FNDA has amassed assets over $9.72 billion, making it one of the largest ETFs in the Style Box - Small Cap Value. This particular fund seeks to match the performance of the Russell RAFI US Small Co. Index before fees and expenses.

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

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.

With one of the cheaper products in the space, this ETF has annual operating expenses of 0.25%.

FNDA's 12-month trailing dividend yield is 1.32%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector - about 20.50% of the portfolio. Financials and Consumer Discretionary round out the top three.

When you look at individual holdings, Echostar Corp Class A (SATS) accounts for about 0.44% of the fund's total assets, followed by Royal Caribbean Group Ltd (RCL) and Abercrombie And Fitch Class A (ANF).

The top 10 holdings account for about 2.59% of total assets under management.

Performance and Risk

The ETF has added roughly 15.16% and was up about 35.15% so far this year and in the past one year (as of 11/11/2024), respectively. FNDA has traded between $23.57 and $31.58 during this last 52-week period.

The ETF has a beta of 1.18 and standard deviation of 21.42% for the trailing three-year period, making it a medium risk choice in the space. With about 1041 holdings, it effectively diversifies company-specific risk.

Alternatives

Schwab Fundamental U.S. Small Company ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

Avantis U.S. Small Cap Value ETF (AVUV) tracks ---------------------------------------- and the Vanguard Small-Cap Value ETF (VBR) tracks CRSP U.S. Small Cap Value Index. Avantis U.S. Small Cap Value ETF has $15.13 billion in assets, Vanguard Small-Cap Value ETF has $32.46 billion. AVUV has an expense ratio of 0.25% and VBR charges 0.07%.

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 - Small 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. Small Company ETF (FNDA): ETF Research Reports

Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report

Royal Caribbean Cruises Ltd. (RCL) : Free Stock Analysis Report

EchoStar Corporation (SATS) : Free Stock Analysis Report

Vanguard Small-Cap Value ETF (VBR): ETF Research Reports

Avantis U.S. Small Cap Value ETF (AVUV): ETF Research Reports

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