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If you're interested in broad exposure to the Small Cap Value segment of the US equity market, look no further than 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 $8.22 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
There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.
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. When you look at long-term performance, value stocks have outperformed growth stocks in nearly all markets. But in strong bull markets, growth stocks are more likely to be winners.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are 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 1.69%.
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 Industrials sector--about 19.50% of the portfolio. Financials and Consumer Discretionary round out the top three.
Looking at individual holdings, Geo Group Inc (GEO) accounts for about 0.43% of total assets, followed by Royal Caribbean Group Ltd (RCL) and United Airlines Holdings Inc (UAL).
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 -14.44% so far this year and is down about -2.35% in the last one year (as of 04/18/2025). In the past 52-week period, it has traded between $23.85 and $32.42.
The ETF has a beta of 1.10 and standard deviation of 22.07% for the trailing three-year period, making it a medium risk choice in the space. With about 996 holdings, it effectively diversifies company-specific risk.