A smart beta exchange traded fund, the Schwab Fundamental U.S. Large Company ETF (FNDX) debuted on 08/13/2013, and offers broad exposure to the Style Box - Large Cap Value category of the market.
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.
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.
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.
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.
The fund is sponsored by Charles Schwab. It has amassed assets over $17.10 billion, making it one of the largest ETFs in the Style Box - Large Cap Value. FNDX seeks to match the performance of the Russell RAFI US Large Co. Index before fees and expenses.
The RAFI Fundamental High Liquidity US Large Index measures the performance of large U.S. 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 0.25% for FNDX, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.78%.
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.
For FNDX, it has heaviest allocation in the Financials sector --about 20.10% of the portfolio --while Information Technology and Healthcare round out the top three.
Looking at individual holdings, Apple Inc (AAPL) accounts for about 4.56% of total assets, followed by Microsoft Corp (MSFT) and Berkshire Hathaway Inc Class B (BRK/B).
FNDX's top 10 holdings account for about 20.76% of its total assets under management.
So far this year, FNDX has lost about -0.84%, and was up about 15.89% in the last one year (as of 01/13/2025). During this past 52-week period, the fund has traded between $20.30 and $25.11.
The fund has a beta of 1 and standard deviation of 15.56% for the trailing three-year period, which makes FNDX a medium risk choice in this particular space. With about 739 holdings, it effectively diversifies company-specific risk.
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 $65.19 billion in assets, Vanguard Value ETF has $127.21 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.
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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