Schwab Fundamental International Small Equity ETF

Schwab Fundamental International Small Equity ETF (FNDC) is an index fund. As of August 31, 2026, it held about 1,570 small companies in developed markets outside the US. It picks and weights them by sales, cash flow, and dividends plus buybacks, not by stock-market value. Its 0.39% expense ratio matches Dimensional's DFIS and is lower than the 0.49% charged by PDN, Invesco's similar RAFI fund. Japan made up about 30% of assets.

• Over the year to Oct 27, 2026, FNDC returned +13.9%, 2nd of 4 among similar funds.
• Its 5-year annualized return was +7.9% and its 10-year +8.4%.
• In the 2020 COVID crash it fell 35.4% and regained its old high 7.6 months after the low.
• Its worst full calendar year was 2018 (-19.1%); its best was 2025 (+35.6%).
• The deepest fall in its price history was 43.2% (Jan 26, 2018 to Mar 23, 2020), recovered by Jan 6, 2021.

As of Aug 31, 2026, the fund held 1,570 securities; the ten largest made up 2.58% of assets. It also reported 3.76% in a money-market fund, most likely cash collateral from lending out shares rather than uninvested money.

• Over the three months to Aug 31, 2026, investors added a net $19.6M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: -3.68%, +1.94%, +4.17%.

FNDC tracks the RAFI Fundamental High Liquidity Developed ex US Small Index, which Schwab licenses from RAFI Indices. Most indexes weight companies by market capitalization, meaning share price times shares outstanding. This index instead gives each company a score based on three measures of business size: adjusted sales, retained operating cash flow, and dividends plus buybacks. It starts with developed-market companies outside the US and ranks them by score. It keeps the smallest ones, which together make up the bottom 12.5% of the total score. Each company's weight is its share of that total score.

The index picks its members and weights once a year. It phases the changes in through four equal segments, rebalancing one segment each quarter, so trading is spread across the year. Schwab uses sampling: it holds a representative subset of the index rather than every stock. At least 90% of net assets go into index stocks. Up to 10% can go elsewhere, including futures used to keep spare cash invested. Portfolio turnover was 29%.

The fund does not hedge currencies, so a rising dollar lowers its returns and a falling dollar raises them. It also lends securities to earn extra income. Some of the 3.76% held in cash as of August 31, 2026, was likely collateral from that lending.

• FNDC charges 0.39% a year, versus an average of 0.43% for the similar funds below (1st of 4, cheapest first).
• Using the prospectus's standard example, $10,000 invested would cost about $40 in the first year and $493 over 10 years (assuming a 5% annual return).

It adds small companies in Japan, Canada, South Korea, the UK and other developed markets, which large US-focused funds barely hold.

FNDC spreads money across about 1,570 foreign small companies, but its declines have been steep. It fell 35.4% in the 2020 COVID crash and recovered in 7.6 months. In 2022 it dropped 28.7% and did not regain its high until May 15, 2024, 19.1 months later. Its worst calendar year was 2018, at -18.77%. Its deepest drop, 43.2%, was not fully made up until January 6, 2021. The fund launched in 2013, so it has no 2008 record. Anyone who has to sell shares in a slump could lock in losses.

The trailing yield was 3.64% as of October 27, 2026. Payments come twice a year, so the income is uneven. In the SEC's standard example, costs on $10,000 come to $493 over 10 years. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.

Matched by holdings overlap from the latest N-PORT reports.