Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the Schwab Fundamental U.S. Large Company Index ETF (FNDX) is a passively managed exchange traded fund launched on 08/13/2013.
The fund is sponsored by Charles Schwab. It has amassed assets over $11.98 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. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.
Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their lower than average sales and earnings growth rates. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however likely to underperform growth stocks in strong bull markets.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
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 1.90%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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 18.50% of the portfolio. Financials and Healthcare round out the top three.
Looking at individual holdings, Apple Inc (AAPL) accounts for about 4.77% of total assets, followed by Microsoft Corp (MSFT) and Berkshire Hathaway Inc Class B (BRKB).
The top 10 holdings account for about 20.85% 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 gained about 10.75% so far this year and is up about 13.15% in the last one year (as of 09/15/2023). In the past 52-week period, it has traded between $47.76 and $59.78.
The ETF has a beta of 1.01 and standard deviation of 16.96% for the trailing three-year period, making it a medium risk choice in the space. With about 733 holdings, it effectively diversifies company-specific risk.
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 $50.97 billion in assets, Vanguard Value ETF has $102.27 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
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
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports