A smart beta exchange traded fund, the Schwab Fundamental U.S. Broad Market ETF (FNDB) debuted on 08/13/2013, and offers broad exposure to the Style Box - All Cap Value category of the market.
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the 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.
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.
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.
The fund is managed by Charles Schwab, and has been able to amass over $911.47 million, which makes it one of the largest ETFs in the Style Box - All Cap Value. Before fees and expenses, FNDB seeks to match the performance of the Russell RAFI US Index.
The RAFI Fundamental High Liquidity US All Index measures the performance of U.S. based companies based on their fundamental size and weight.
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.25% for this ETF, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.68%.
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.
Representing 19.50% of the portfolio, the fund has heaviest allocation to the Financials sector; Information Technology and Healthcare round out the top three.
Looking at individual holdings, Apple Inc (AAPL) accounts for about 4.71% of total assets, followed by Microsoft Corp (MSFT) and Berkshire Hathaway Inc Class B (BRK/B).
FNDB's top 10 holdings account for about 20.03% of its total assets under management.
The ETF return is roughly 3.83% and it's up approximately 20.21% so far this year and in the past one year (as of 02/03/2025), respectively. FNDB has traded between $20.53 and $24.70 during this last 52-week period.
FNDB has a beta of 1.01 and standard deviation of 15.63% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 1689 holdings, it effectively diversifies company-specific risk.
Schwab Fundamental U.S. Broad Market 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.
Capital Group Dividend Value ETF (CGDV) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Capital Group Dividend Value ETF has $13.32 billion in assets, iShares Core S&P U.S. Value ETF has $20.07 billion. CGDV has an expense ratio of 0.33% 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.
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 ETF (FNDB): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
iShares Core S&P U.S. Value ETF (IUSV): ETF Research Reports
Capital Group Dividend Value ETF (CGDV): ETF Research Reports
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