Schwab Fundamental U.S. Large Company Index ETF (FNDX)

ETF Schwab Fundamental U.S. Large Company Index ETF Overview

Profile:

The ETF Schwab Fundamental U.S. Large Company Index ETF (NYSEARCA: FNDX) is a passively managed exchange-traded fund that tracks the performance of the Schwab Fundamental U.S. Large Company Index. This index is comprised of large-cap U.S. stocks selected based on fundamental factors such as profitability, growth, and financial health. The ETF's asset allocation primarily focuses on the large-cap segment of the U.S. stock market, with exposure to various sectors including technology, healthcare, financials, and consumer staples.

Objective:

The primary investment goal of FNDX is to provide investors with broad exposure to the U.S. large-cap stock market while emphasizing fundamental factors. This approach aims to achieve long-term capital appreciation through a diversified portfolio of well-established and financially sound companies.

Issuer:

Schwab Asset Management, Inc. is the issuer of FNDX.

• Reputation and Reliability: Schwab Asset Management is a subsidiary of the Charles Schwab Corporation, a leading financial services provider with a strong reputation for reliability and customer service.
• Management: The ETF is managed by a team of experienced investment professionals with expertise in fundamental analysis and portfolio construction.

Market Share:

FNDX currently holds a market share of approximately 0.25% within the U.S. large-cap core equity ETF category.

Total Net Assets:

The ETF has approximately $16 billion in total net assets under management as of October 26, 2023.

Moat:

FNDX's competitive advantages include:

• Low Expense Ratio: The ETF has an expense ratio of 0.05%, making it one of the most cost-effective options in its category.
• Passive Management: The passive management approach minimizes tracking error and transaction costs, leading to greater efficiency.
• Focus on Fundamentals: The emphasis on fundamental factors potentially enhances long-term returns and reduces risk by investing in financially sound companies.
• Schwab's Brand Recognition: The backing of a reputable and established financial institution like Schwab provides investors with confidence and credibility.

Financial Performance:

FNDX has historically outperformed its benchmark, the S&P 500 Index, over different time periods.

• 1 Year: 10.6% vs. 7.6%
• 3 Years: 16.5% vs. 13.8%
• 5 Years: 11.2% vs. 9.5%

Growth Trajectory:

The ETF has experienced steady growth in both assets under management and market share, indicating increasing investor interest in its fundamental approach.

Liquidity:

FNDX has a high average daily trading volume, making it a very liquid ETF, which translates to ease of buying and selling shares with minimal impact on price. The bid-ask spread is also relatively tight, indicating low transaction costs.

Market Dynamics:

The U.S. large-cap market is influenced by various factors, including economic growth, interest rate policies, and geopolitical events. These factors can impact the performance of FNDX, as its underlying holdings are sensitive to such market dynamics.

Competitors:

Key competitors of FNDX include IVV (iShares CORE S&P 500), VOO (Vanguard S&P 500 ETF), and SPY (SPDR S&P 500 ETF). These ETFs also offer broad exposure to the U.S. large-cap market but may differ in terms of expense ratios, tracking methodologies, and specific investment strategies.

Expense Ratio:

The ETF's expense ratio is 0.05%, making it one of the lowest-cost options in its category.

Investment Approach and Strategy:

• Strategy: FNDX passively tracks the Schwab Fundamental U.S. Large Company Index.
• Composition: The ETF primarily holds large-cap U.S. stocks selected based on fundamental factors such as profitability, growth, and financial health.

Key Points:

• Low expense ratio
• Passive management
• Focus on fundamental factors
• Outperformance of benchmark
• High liquidity

Risks:

• Market Risk: FNDX is exposed to the risks associated with the U.S. large-cap stock market, such as market volatility, economic downturns, and interest rate changes.
• Tracking Error: While aiming to track its benchmark, the ETF may experience tracking error due to factors like stock selection and trading costs.
• Management Risk: The performance of FNDX is dependent on the management team's ability to select and weight holdings effectively.

Who Should Consider Investing:

• Investors seeking broad exposure to the U.S. large-cap stock market
• Investors who value a fundamental approach to investing
• Investors seeking a low-cost investment option
• Investors with a long-term investment horizon

Fundamental Rating Based on AI:

Based on an AI-powered analysis of financial health, market position, and future prospects, FNDX receives a 7.5 out of 10. The rating considers the ETF's low expense ratio, strong historical performance, focus on fundamental factors, and the reputation of the issuer.

Justification:

The AI rating recognizes FNDX's strengths, including its cost-efficiency, outperformance, and focus on fundamentals. However, factors such as market risk, tracking error, and management dependence contribute to the slightly lower score.

Resources and Disclaimers:

• ETF Database: https://etfdb.com/etf/FNDX/
• Schwab Asset Management: https://am.schwab.com/

Disclaimer: This analysis is for informational purposes only and should not be considered financial advice.