Designed to provide broad exposure to the Broad Developed World ETFs category of the market, the Schwab Fundamental International Small Company Index ETF (FNDC) is a smart beta exchange traded fund launched on 08/13/2013.
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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
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.
Managed by Charles Schwab, FNDC has amassed assets over $3.11 billion, making it one of the larger ETFs in the Broad Developed World ETFs. FNDC seeks to match the performance of the Russell RAFI Developed ex-U.S. Small Co. Index (Net) before fees and expenses.
The RAFI Fundamental High Liquidity Developed ex US Small Index measures the performance of small non-U.S. developed market companies based on their fundamental size and weight.
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.
Operating expenses on an annual basis are 0.39% for this ETF, which makes it on par with most peer products in the space.
FNDC's 12-month trailing dividend yield is 2.87%.
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.
When you look at individual holdings, Celestica Inc (CLS) accounts for about 0.36% of the fund's total assets, followed by Dsm Firmenich Ag (DSFIR) and Rolls-Royce Holdings Plc (RR.).
Its top 10 holdings account for approximately 1.27% of FNDC's total assets under management.
The ETF has added roughly 2.52% and was up about 9.93% so far this year and in the past one year (as of 11/25/2024), respectively. FNDC has traded between $32.83 and $38.50 during this last 52-week period.
The ETF has a beta of 0.93 and standard deviation of 16.67% for the trailing three-year period, making it a low risk choice in the space. With about 2010 holdings, it effectively diversifies company-specific risk.
Schwab Fundamental International Small Company Index ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Total International Stock ETF (VXUS) tracks FTSE Global All Cap ex US Index and the Vanguard FTSE Developed Markets ETF (VEA) tracks FTSE Developed All Cap ex US Index. Vanguard Total International Stock ETF has $75.95 billion in assets, Vanguard FTSE Developed Markets ETF has $135.72 billion. VXUS has an expense ratio of 0.08% and VEA charges 0.06%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.
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 International Small Company Index ETF (FNDC): ETF Research Reports
Celestica, Inc. (CLS) : Free Stock Analysis Report
Vanguard FTSE Developed Markets ETF (VEA): ETF Research Reports
Vanguard Total International Stock ETF (VXUS): ETF Research Reports
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