Looking for broad exposure to the Small Cap Value segment of the US equity market? You should consider the Schwab Fundamental U.S. Small Company ETF (FNDA), a passively managed exchange traded fund launched on 08/13/2013.
The fund is sponsored by Charles Schwab. It has amassed assets over $8.14 billion, making it one of the larger ETFs attempting to match the Small Cap Value segment of the US equity market.
Why Small Cap Value
Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.
While 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. 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.
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%, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 1.53%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Industrials sector--about 19.80% of the portfolio. Financials and Consumer Discretionary round out the top three.
Looking at individual holdings, Verisign Inc (VRSN) accounts for about 0.41% of total assets, followed by Geo Group Inc (GEO) and Gamestop Corp Class A (GME).
The top 10 holdings account for about 3.18% of total assets under management.
Performance and Risk
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.
The ETF has lost about -5.62% so far this year and was up about 3.74% in the last one year (as of 06/20/2025). In the past 52-week period, it has traded between $23.85 and $32.42.
The ETF has a beta of 1.09 and standard deviation of 21.10% for the trailing three-year period, making it a medium risk choice in the space. With about 993 holdings, it effectively diversifies company-specific risk.
Alternatives
Schwab Fundamental U.S. Small Company ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FNDA is a great option for investors seeking exposure to the Style Box - Small Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 2000 Value ETF (IWN) and the Vanguard Small-Cap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $10.72 billion in assets, Vanguard Small-Cap Value ETF has $28.84 billion. IWN has an expense ratio of 0.24% and VBR charges 0.07%.
Bottom-Line
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also 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. Small Company ETF (FNDA): ETF Research Reports VeriSign, Inc. (VRSN): Free Stock Analysis Report GameStop Corp. (GME): Free Stock Analysis Report Geo Group Inc (The) (GEO): Free Stock Analysis Report Vanguard Small-Cap Value ETF (VBR): ETF Research Reports iShares Russell 2000 Value ETF (IWN): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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