Making its debut on 08/13/2013, smart beta exchange traded fund Schwab Fundamental U.S. Small Company ETF (FNDA) provides investors broad exposure to the Style Box - Small Cap Value category of the market.

What Are Smart Beta ETFs?

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.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

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.

Fund Sponsor & Index

FNDA is managed by Charles Schwab, and this fund has amassed over $8.61 billion, which makes it one of the larger ETFs in the Style Box - Small Cap Value. FNDA 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

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 FNDA, making it one of the cheaper products in the space.

It's 12-month trailing dividend yield comes in at 1.65%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

FNDA's heaviest allocation is in the Industrials sector, which is about 19.40% of the portfolio. Its Financials and Consumer Discretionary round out the top three.

Taking into account individual holdings, Echostar Corp Class A (SATS) accounts for about 0.40% of the fund's total assets, followed by United Airlines Holdings Inc (UAL) and Geo Group Inc (GEO).

Its top 10 holdings account for approximately 3.39% of FNDA's total assets under management.

Performance and Risk

So far this year, FNDA has lost about -6.87%, and was up about 2.93% in the last one year (as of 03/19/2025). During this past 52-week period, the fund has traded between $26.41 and $32.42.

FNDA has a beta of 1.21 and standard deviation of 20.84% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 1025 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 $14.54 billion in assets, Vanguard Small-Cap Value ETF has $29.49 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

United Airlines Holdings Inc (UAL) : Free Stock Analysis Report

EchoStar Corporation (SATS) : Free Stock Analysis Report

Geo Group Inc (The) (GEO) : Free Stock Analysis Report

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

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

This article originally published on Zacks Investment Research (zacks.com).

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