The Schwab Fundamental U.S. Large Company ETF (FNDX) was launched on 08/13/2013, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $17.72 billion, this makes it one of the largest ETFs in the Style Box - Large Cap Value. FNDX is managed by Charles Schwab. Before fees and expenses, FNDX seeks to match the performance of the Russell RAFI US Large Co. Index.
The RAFI Fundamental High Liquidity US Large Index measures the performance of large 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 FNDX, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.82%.
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.
For FNDX, it has heaviest allocation in the Financials sector --about 17.90% of the portfolio --while Information Technology and Healthcare round out the top three.
Looking at individual holdings, Apple Inc (AAPL) accounts for about 3.95% of total assets, followed by Microsoft Corp (MSFT) and Berkshire Hathaway Inc Class B (BRK/B).
The top 10 holdings account for about 20.45% of total assets under management.
Performance and Risk
So far this year, FNDX has lost about -0.27%, and it's up approximately 6.63% in the last one year (as of 05/22/2025). During this past 52-week period, the fund has traded between $20.84 and $25.11.
The fund has a beta of 0.94 and standard deviation of 16.11% for the trailing three-year period, which makes FNDX a medium risk choice in this particular space. With about 746 holdings, it effectively diversifies company-specific risk.
Alternatives
Schwab Fundamental U.S. Large Company ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
Schwab U.S. Dividend Equity ETF (SCHD) tracks Dow Jones U.S. Dividend 100 Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. Schwab U.S. Dividend Equity ETF has $67.93 billion in assets, Vanguard Value ETF has $132.67 billion. SCHD has an expense ratio of 0.06% and VTV 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 - Large 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. Large Company 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 Schwab U.S. Dividend Equity ETF (SCHD): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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