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Is Schwab Fundamental US Small Company Index ETF (FNDA) a strong ETF right now?

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Debuting on 8/13/2013, the Smart Beta exchange-traded fund Schwab Fundamental US Small Company Index ETF (FNDA) offers investors broad exposure to the market’s style box – small cap value category.

What are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market capitalization indices, strategies designed to represent the market or a particular market segment.

Market-cap-weighted indices provide an inexpensive, convenient, and transparent way to replicate market returns and are a good choice for investors who believe in market efficiency.

If you are the type of investor who would try to beat the market through good stock selection, Smart Beta Funds are your best choice; This fund class is known to follow non-cap weighted strategies.

This type of index follows the same mindset as it seeks to select stocks that have the best potential for risk-return performance; Selecting non-cap-weighted strategies based on certain fundamental characteristics, or a combination of such characteristics.

While this space offers investors many options – think of the simplest methodologies such as equal weighting to the more complex such as fundamental and volatility/momentum based weightings – all of which are capable of delivering top-notch results. are not.

Fund sponsor and index

The fund is managed by Charles Schwab. FNDA has been able to amass assets of over $5.97 billion, making it one of the largest ETFs in the style box: Small Cap Value. This specialized fund aims to match the return of the Russell RAFI US Small Company Index before fees and charges.

The Russell RAFI US Small Company Index measures the performance of the small business segment using fundamental composite company scores.

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costs and other expenses

The expense ratio is an important factor in an ETF’s returns, and over the long term, cheaper funds can outperform their more expensive cousins, with other things remaining the same.

The operating cost for FNDA is 0.25% annualized, which puts it on par with most similar products in the space.

FNDA’s 12-month Trailing Dividend Yield is 1.46%.

Sector exposure and top positions

While ETFs provide diversified exposure, minimizing risk associated with individual stocks, it’s a valuable exercise to dig deeper into a fund’s holdings. And most ETFs are highly transparent products that disclose their holdings daily.

FNDA’s heaviest allocation is to the industrial sector, which accounts for about 19% of the portfolio. Financials and consumer discretionary are among the top three.

Looking at individual holdings, Diamondback Energy Inc (FANG) represents approximately 0.46% of the fund’s total assets, followed by First Citizens Bankshare Inc Class (FCNCA) and Patterson UT Energy Inc (PTEN).

FNDA’s top 10 holdings account for approximately 3.42% of total assets under management.

performance and risk

The ETF has lost about -10.91% so far this year and is down about -11.35% in the last year (as of 11/25/2022). Over the past 52-week period, it traded between $42.52 and $56.50.

The ETF has a beta of 1.18 and a standard deviation of 31.15% for the three-year tracking period, making it a medium-risk option in the space. With approximately 983 participations, the company-specific risk is effectively spread.

Alternative

The Schwab Fundamental US Small Company Index ETF is a reasonable choice for investors looking to outperform the style box – small cap value segment of the market. However, there are other ETFs in this sector for investors to consider.

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The IShares Russell 2000 Value ETF (IWN) tracks the Russell 2000 Value Index and the Vanguard SmallCap Value ETF (VBR) tracks the CRSP US Small Cap Value Index. The iShares Russell 2000 Value ETF has $12.53 billion in assets, the Vanguard SmallCap Value ETF has $24.69 billion. IWN has an expense ratio of 0.23% and VBR charges 0.07%.

Investors seeking low-cost, low-risk options should consider traditional market-cap-weighted ETFs, which aim to match the returns of Style Box – Small Cap Value.

ground floor

To learn more about this product and other ETFs, view the products that fit your investment goals, and read articles about the latest developments in the ETF investment universe, visit the Zacks ETF Center.

Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report

Schwab Fundamental US Small Company Index ETF (FNDA): ETF Research Report

PattersonUTI Energy, Inc. (PTEN): Free stock analysis report

First Citizens Bankshare, Inc. (FCNCA): Free Stock Analysis Report

Diamondback Energy, Inc. (FANG): Free stock analysis report

Vanguard SmallCap Value ETF (VBR): ETF Research Report

iShares Russell 2000 Value ETF (IWN): ETF Research Report

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Jax Investment Research

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