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Should Schwab Fundamental U.S. Large Company Index ETF (FNDX) Be on Your Investing Radar?

Style Box ETF report for FNDX

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This story originally appeared on Zacks

If you're interested in broad exposure to the Large Cap Value segment of the US equity market, look no further than the Schwab Fundamental U.S. Large Company Index ETF (FNDX), a passively managed exchange traded fund launched on 08/13/2013.

- Zacks

The fund is sponsored by Charles Schwab. It has amassed assets over $8.63 billion, making it one of the larger ETFs attempting to match the Large Cap Value segment of the US equity market.

Why Large Cap Value

Large cap companies usually have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. While value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.

Costs

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 counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.25%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.66%.

Sector Exposure and Top Holdings

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.

This ETF has heaviest allocation to the Information Technology sector--about 17.50% of the portfolio. Financials and Healthcare round out the top three.

Looking at individual holdings, Apple Inc Common Stock Usd.00001 (AAPL) accounts for about 4.13% of total assets, followed by Exxon Mobil Corp Common Stock (XOM) and Microsoft Corp Common Stock Usd.00000625 (MSFT).

The top 10 holdings account for about 18.3% of total assets under management.

Performance and Risk

FNDX seeks to match the performance of the Russell RAFI US Large Co. Index before fees and expenses. The Russell RAFI US Large Company Index measures the performance of the large company size segment by fundamental overall company scores.

The ETF has added about 30.74% so far this year and is up about 31.80% in the last one year (as of 12/23/2021). In the past 52-week period, it has traded between $44.75 and $58.18.

The ETF has a beta of 1.05 and standard deviation of 23.57% for the trailing three-year period, making it a medium risk choice in the space. With about 722 holdings, it effectively diversifies company-specific risk.

Alternatives

Schwab Fundamental U.S. Large Company Index ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FNDX is a good option for those seeking exposure to the Style Box - Large Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $58.60 billion in assets, Vanguard Value ETF has $90.98 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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 Index ETF (FNDX): ETF Research Reports

 

Apple Inc. (AAPL): Free Stock Analysis Report

 

Microsoft Corporation (MSFT): Free Stock Analysis Report

 

Exxon Mobil Corporation (XOM): Free Stock Analysis Report

 

Vanguard Value ETF (VTV): ETF Research Reports

 

iShares Russell 1000 Value ETF (IWD): ETF Research Reports

 

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