Should Schwab Fundamental U.S. Small Company ETF (FNDA) Be on Your Investing Radar?

Launched on August 13, 2013, the Schwab Fundamental U.S. Small Company ETF (FNDA) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Value segment of the US equity market.

The fund is sponsored by Charles Schwab. It has amassed assets over $9.17 billion, making it one of the largest ETFs attempting to match the Small Cap Value segment of the US equity market.

Why Small Cap Value

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

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. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.

Costs

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%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.12%.

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 19.1% of the portfolio. Financials and Information Technology round out the top three.

Looking at individual holdings, Compass Inc Class A (COMP) accounts for about 0.5% of total assets, followed by Victoria S Secret (VSXY) and Lumentum Holdings (LITE).

The top 10 holdings account for about 3.91% 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 gained about 18.97% so far this year and was up about 20.64% in the last one year (as of 08/31/2026). In the past 52-week period, it has traded between $29.34 and $38.52.

The ETF has a beta of 1.03 and standard deviation of 19.08% for the trailing three-year period, making it a medium risk choice in the space. With about 920 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 an outstanding 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 Morningstar Small-Cap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $14.55 billion in assets, Vanguard Morningstar Small-Cap Value ETF has $37.65 billion. IWN has an expense ratio of 0.24% and VBR charges 0.05%.

Bottom-Line

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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This article originally published on Zacks Investment Research (zacks.com).

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