Fundamental ETFs
A fundamental ETF is a so-called smart beta ETF that follows an index that selects stocks to buy using some fundamental measure about a company, such as the company's total revenue, or total stockholders equity, or debt to equity ratio. In the investing world, the term "fundamental" generally refers to information about a company that you can obtain from the company's financial statements. Some fundamental indexes also weight the stocks they are holding not on each stock's market capitalization but instead using each stock's total sales revenue, or some other fundamental measure of a company's size.
The idea is to select "good companies" based on each company's financial statements. Proponents of fundamental indexes believe that traditional stock market indexes that select and weight stocks using each company's market capitalization end up holding too many stocks that are "overvalued" or "overhyped".
We end up classifying most fundamental ETFs as "multi-factor" ETFs, because many fundamental ETFs select stocks using some measure of the company's earnings, which is the quality factor, or they select stocks with dividends.
The fundamental ETFs use different approaches, so let's run through a few examples of what they are doing.
FNDB, the Schwab Fundamental U.S. Broad Market Index ETF, tracks the Russell RAFI U.S. index, which selects and weights stocks using the average of three fundamental measures of company size: retained operating cash flow, adjusted sales, and dividends plus buybacks. FNDB is very much a "multi-factor" ETF, because by selecting stocks based on retained operating cash flow and dividends it is using the "quality" factor, while also selecting stocks based on dividends plus stock buybacks. FNDB also is using an alternate weighting scheme.
RWL, the Revenue Shares Large Cap Fund ETF, tracks the S&P 500 but weights the stocks using each company's top line revenue rather than market capitalization.
FNDB and RWL are good examples of the challenge investors face when looking at smart beta ETFs:
- Smart beta ETFs are fairly new
- Every smart beta ETF seems to use a slightly different methodology (it seems like no two smart beta ETFs are ever the same)
- It is hard to understand what "factor tilts" you are getting
One thing to always worry about with these smart beta ETFs is the unintended factor tilts that occur. RWL weights the S&P 500 using top line revenue. Is that really a good thing? The data provided by RWL's website clearly shows a value tilt, but it is hard to know what other factor tilts occur by doing this. Quality is one of the most well documented factors -- all things being equal, the stocks of highly profitable companies tend to outperform over long periods of time. Does ranking the S&P 500 by top line revenue unintentionally reduce your exposure to the "quality" factor? It is hard to know.
Both FNDB and RWL have decent track records so far, so we don't want to sound like we are being too critical. We are just trying to illustrate the difficulties associated with analyzing smart beta ETFs. Especially since every one seems to use a slightly different approach.
Here are the fundamental ETFs that use fundamental factors as an investment factor:
| Name | Symbol | Last price | Currency |
|---|---|---|---|
| INVESCO FTSE RAFI US 1500 SM | XNAS:PRFZ | 42.06 | USD |
| INVESCO DYNAMIC SOFTWARE ETF | ARCX:IGPT | 45.88 | USD |
| GLOBAL X THEMATIC GROWTH ETF | XNAS:GXTG | 23.95 | USD |
| ISHARES US TECH BREAKTHROUGH | ARCX:TECB | 54.07 | USD |
| Market Vectors Fallen Angel | XNYS:ANGL | 28.77 | USD |
| ALPS Medical Breakthroughs ETF | ARCX:SBIO | 33.82 | USD |
| DoubleLine ETF Trust DoubleLine Fortune 500 Equal Weight ETF | ARCX:DFVE | 28.59 | USD |
| iShares U.S. Dividend and Buyback | BATS:DIVB | 47.42 | USD |
| NuShares Enhanced Yield US Aggregate Bond | ARCX:NUAG | 20.66 | USD |
| iShares Morningstar Large-Cap ETF | ARCX:ILCB | 81.94 | USD |
| First Trust Morningstar ETF | ARCX:FDL | 40.17 | USD |
| INVESCO DYNAMIC MEDIA ETF | ARCX:GGME | 51.81 | USD |
| Fidelity® International High Dividend ETF | ARCX:FIDI | 19.31 | USD |
| WISDOMTREE US SHORT TERM COR | BATS:QSIG | 48.19 | USD |
| Invesco Exchange-Traded Fund Trust II Invesco S&P SmallCap 600 GARP ETF | ARCX:GRPZ | 26.20 | USD |
| JPMORGAN US QUALITY FACTOR | ARCX:JQUA | 57.99 | USD |
| iShares Core Dividend Growth ETF | ARCX:DGRO | 61.41 | USD |
| Schwab Fndmntl US Lrg Cmpny Indx | ARCX:FNDX | 23.76 | USD |
| Themes US Small Cap Cash Flow Champions ETF | XNAS:SMCF | 30.77 | USD |
| INVESCO INV GRADE DEFENSIVE | ARCX:IIGD | 24.27 | USD |
| Roundhill Ball Metaverse ETF | ARCX:METV | 14.61 | USD |
| INVESCO S&P MIDCAP 400 EQUAL | ARCX:GRPM | 112.48 | USD |
| EA Series Trust Strive U.S. Semiconductor ETF | XNYS:SHOC | 45.78 | USD |
| Amplify ETF Trust Amplify Thematic All-Stars ETF | ARCX:MVPS | 24.74 | USD |
| SPDR Russell 1000 Yield Focus ETF | ARCX:ONEY | 109.78 | USD |
| Oppenheimer S&P MidCap 400 Revenue ETF | XNYS:RWK | 116.33 | USD |
| Columbia Emerging Markets Consumer ETF | ARCX:ECON | 20.95 | USD |
| INVESCO RAYMOND JAMES SB-1 E | ARCX:UPGD | 70.78 | USD |
| Themes US Cash Flow Champions ETF | XNAS:USCF | 29.94 | USD |
| First Trust Exchange-Traded Fund VI First Trust S&P 500 Economic Moat ETF | ARCX:EMOT | 21.18 | USD |
| SPDR Bloomberg Barclays Corp Bond ETF | ARCX:SPBO | 28.66 | USD |
| Goldman Sachs ETF Trust Goldman Sachs Access U.S. Aggregate Bond ETF | ARCX:GCOR | 40.58 | USD |
| ETRACS 2x Leveraged US Dividend Factor TR ETN | ARCX:SCDL | 37.80 | USD |
| Northern Lights Fund Trust IV Monarch Volume Factor Global Unconstrained Index ETF | BATS:MVFG | 26.33 | USD |
| iShares Emerging Markets Dvdnd Indx Fd | ARCX:DVYE | 25.86 | USD |
| SPDR S&P Emerging Markets Dividend | ARCX:EDIV | 35.19 | USD |
| iShares Core High Dividend ETF | ARCX:HDV | 111.94 | USD |
| iShares US Infrastructure | BATS:IFRA | 46.32 | USD |
| Fidelity Metaverse ETF | XNAS:FMET | 30.16 | USD |
| Procure Space ETF | XNYS:UFO | 22.82 | USD |
| WisdomTree US SmallCap Earnings Fund | ARCX:EES | 53.90 | USD |
| WisdomTree US MidCap Earnings Fund | ARCX:EZM | 62.81 | USD |
| IQ Global Equity R&D Leaders ETF | XNAS:WRND | 29.53 | USD |
| Fidelity Quality Factor | ARCX:FQAL | 65.84 | USD |
| Amplify ETF Trust Amplify Natural Resources Dividend Income ETF | ARCX:NDIV | 27.28 | USD |
| Psh Msci Emg Etf | BATS:EMDV | 43.52 | USD |
| SPDR FactSet Innovative Technology ETf | ARCX:XITK | 177.54 | USD |
| First Trust DJ Global Select Dividend | ARCX:FGD | 22.12 | USD |
| WisdomTree India Earnings Fund | ARCX:EPI | 46.12 | USD |
| First Trust Exchange-Traded Fund VI First Trust Bloomberg R&D Leaders ETF | ARCX:RND | 24.91 | USD |
| Flex Shrs Mrngtr EmengMktFctrTiltIdxFd | ARCX:TLTE | 51.48 | USD |
| Virtus Real Asset Income ETF | ARCX:VRAI | 22.45 | USD |
| iShares Morningstar Mid-Cap ETF | ARCX:IMCB | 76.92 | USD |
| AMERICAN CENTURY QLTY DIVER | ARCX:QINT | 47.67 | USD |
| ROBO GLOBAL HEALTHCARE TECH | ARCX:HTEC | 29.03 | USD |
| PowerShares S&P SmallCap Quality Portfolio | XNYS:XSHQ | 42.92 | USD |
| WisdomTree Cybersecurity Fund | XNAS:WCBR | 28.95 | USD |
| Invesco Fdamental High Yield Corporate B | XNYS:PHB | 18.17 | USD |
| INVESCO S&P SMALLCAP 600 | ARCX:RWJ | 45.68 | USD |
| Siren Nasdaq NexGen Economy ETF | XNAS:BLCN | 26.72 | USD |
| ROBO Global Artificial Intelligence ETF | ARCX:THNQ | 49.70 | USD |
| iShares International Dividend Growth | BATS:IGRO | 67.88 | USD |
| Invesco FTSE RAFI Emerging Markets ETF | XNYS:PXH | 20.68 | USD |
| region | BATS:ATMP | 27.88 | USD |
| ProShares Trust ProShares S&P Global Core Battery Metals ETF | ARCX:ION | 25.78 | USD |
| INVESCO INDIA EXCHANGE-TRADE | ARCX:PIN | 28.36 | USD |
| INVESCO FTSE RAFI US 1000 ET | ARCX:PRF | 40.60 | USD |
| Flex Shrs Mrngt Dvlpd Mktex US Fctr Tilt | ARCX:TLTD | 68.55 | USD |
| Northern Lights Fund Trust IV Monarch ProCap ETF | BATS:MPRO | 28.74 | USD |
| Harbor ETF Trust Harbor AlphaEdge Small Cap Earners ETF | ARCX:EBIT | 32.19 | USD |
| SPROTT GOLD MINERS ETF | ARCX:SGDM | 27.97 | USD |
| Schwab Fndmntl Emrng Mkt Lrg Cmpny Indx | ARCX:FNDE | 29.10 | USD |
| First Trust DJ Select MicroCap ETF | ARCX:FDM | 67.71 | USD |
| VanEck Vectors Morningstar Global Wide Moat | BATS:MOTG | 38.50 | USD |
| Amplify ETF Trust Amplify AI Powered Equity ETF | ARCX:AIEQ | 40.13 | USD |
| Monarch Blue Chips Core ETF | BATS:MBCC | 34.86 | USD |
| Invesco Fdamental Inv Gr Corporate Bd ET | XNYS:PFIG | 23.62 | USD |
| iShares Cohen & Steers REIT | BATS:ICF | 59.84 | USD |
| IQ 500 International | ARCX:IQIN | 32.60 | USD |
| INVESCO RAFI STRATEGIC US ET | XNAS:IUS | 50.05 | USD |
| U.S. Global GO GOLD and Precious Metal Miners | ARCX:GOAU | 19.50 | USD |
| ETRACS 2x Leveraged IFED Invest with the Fed TR Index ETN | ARCX:FEDL | 55.71 | USD |
| INVESCO FTSE RAFI DEVELOPED | ARCX:PDN | 31.84 | USD |
| ETRACS IFED Invest with the Fed TR Index ETN | ARCX:IFED | 41.29 | USD |
| Donoghue Forlines Yield Enhanced Real Asset ETF | BATS:DFRA | 31.38 | USD |
| Innovator Loup Frontier Tech | ARCX:LOUP | 55.00 | USD |
| Monarch Ambassador Income ETF | BATS:MAMB | 22.23 | USD |
| GOLDMAN SACHS INV GRD CORP | ARCX:GIGB | 45.31 | USD |
| Invesco BuyBack Achievers ETF | XNAS:PKW | 116.26 | USD |
| ETRACS 2x Leveraged MSCI US Quality Factor TR ETN | ARCX:QULL | 48.48 | USD |
| WISDOMTREE US CORPORATE BOND | BATS:QIG | 44.12 | USD |
| PIMCO RAFI ESG US ETF | ARCX:RAFE | 36.66 | USD |
| INVESCO FTSE RAFI DEVELOPED | ARCX:PXF | 47.76 | USD |
| First Trust SMID Cap Rising Dividend Achievers ETF | XNAS:SDVY | 35.83 | USD |
| Global X S&P 500 Quality Dividend | ARCX:QDIV | 34.88 | USD |
| Global X Millennials Thematic ETF | XNAS:MILN | 45.90 | USD |
| VanEck Vect Morningstar Wide Moat ETF | BATS:MOAT | 94.86 | USD |
| JPMorgan USD Emerging Market Sovereign Bond | ARCX:JPMB | 38.40 | USD |
| iShares Morningstar Small-Cap ETF | ARCX:ISCB | 58.92 | USD |
| GOLDMAN SACHS ACCESS HY CORP | ARCX:GHYB | 44.75 | USD |
| Barron'S 400 | ARCX:BFOR | 73.19 | USD |
| VanEck Moody's Analytics BBB Corporate Bond ETF | BATS:MBBB | 21.22 | USD |
| Pacer BioThreat Strategy ETF | BATS:VIRS | 40.03 | USD |
| WBI Power Factor High Dividend | ARCX:WBIY | 30.07 | USD |
| Themes Natural Monopoly ETF | XNAS:CZAR | 28.75 | USD |
| Flexshares US Corp Bond Fund | XNAS:SKOR | 47.67 | USD |
| INVESCO S&P ULTRA DIVIDEND | ARCX:RDIV | 48.79 | USD |
| ALPS O'Shares Global Internet Giants ETF | BATS:OGIG | 47.21 | USD |
| VanEck Vectors Morningstar Durable Dividend | BATS:DURA | 32.84 | USD |
| American Customer Satisfaction ETF | BATS:ACSI | 61.33 | USD |
| WisdomTree Fund US High Yield Corp Bond | BATS:QHY | 45.41 | USD |
| Global X Longevity Thematic | XNAS:AGNG | 30.31 | USD |
| Hoya Capital High Dividend Yield ETF | ARCX:RIET | 10.11 | USD |
| Direxion Daily NYSE FANG+ Bull 2X Shares | ARCX:FNGG | 185.10 | USD |
| iShares Fallen Angels USD Bond | XNAS:FALN | 26.69 | USD |
| Simplify Exchange Traded Funds Simplify Next Intangible Core Index ETF | BATS:NXTI | 29.10 | USD |
| ETF Series Solutions Blue Horizon BNE ETF | ARCX:BNE | 22.49 | USD |
| iShares Edge MSCI USA Quality Factor | BATS:QUAL | 179.43 | USD |
| iShares Edge MSCI Intl Quality Factor ET | ARCX:IQLT | 37.06 | USD |
| PACER US EXPORT LEADERS ETF | ARCX:PEXL | 48.49 | USD |
| Elevation Series Trust SRH U.S. Quality ETF | ARCX:SRHQ | 37.59 | USD |
| Northern Lights Fund Trust IV Monarch Volume Factor Dividend Tree Index ETF | BATS:MVFD | 26.03 | USD |
| WisdomTree Europe Hedged Equity | ARCX:HEDJ | 43.65 | USD |
| Themes US R&D Champions ETF | XNAS:USRD | 30.76 | USD |
| First Trust Capital Strength ETF | XNAS:FTCS | 88.16 | USD |
| Schwab US Dividend Equity ETF | ARCX:SCHD | 27.29 | USD |
| Global X Telemedicine & Digital Health ETF | XNAS:EDOC | 10.15 | USD |
| Goldman Sachs ETF Trust Goldman Sachs Access Emerging Markets USD Bond ETF | BATS:GEMD | 40.27 | USD |
| First Trust ETF Shs Total US Marekt Alph | XNAS:FTDS | 50.41 | USD |
| First Trust Exchange-Traded Fund First Trust S&P 500 Diversified Free Cash Flow ETF | ARCX:FCFY | 23.92 | USD |
| INVESCO S&P 500 REVENUE ETF | ARCX:RWL | 98.75 | USD |
| iShares Emergent Food and AgTech Multisector ETF | XNAS:IVEG | 19.76 | USD |
| GRANITESHARES XOUT US L/C | ARCX:DRUP | 57.36 | USD |
| Golden Sachs ETF Trust Goldman Sachs Access Investment Grade Corporate 1-5 Year Bond ETF | ARCX:GSIG | 46.90 | USD |
| Invesco S&P Intl Developed Quality ETF | XNYS:IDHQ | 28.52 | USD |
| First Trust Exchange-Traded Fund II First Trust Emerging Markets Human Flourishing ETF | ARCX:FTHF | 21.27 | USD |
| WisdomTree US Earnings 500 Fund | ARCX:EPS | 61.91 | USD |
| Amplify Cash Flow Dividend Leaders ETF | XNAS:COWS | 29.39 | USD |
| Invesco Intl BuyBack Achievers ETF | XNAS:IPKW | 39.75 | USD |
| First Trust Rising Dividend Achievers ET | XNAS:RDVY | 59.29 | USD |
| TrimTabs ETF Trust Donoghue Forlines Risk Managed Innovation ETF | BATS:DFNV | 37.72 | USD |
| DBX ETF TRUST - XTRACKERS RU | ARCX:QARP | 52.45 | USD |
| VanEck Moody's Analytics IG Corporate Bond ETF | BATS:MIG | 21.22 | USD |
| Schwab Fndmntl Intl Lrg Compny Indx | ARCX:FNDF | 32.92 | USD |
| Roundhill Sports Betting & iGaming ETF | ARCX:BETZ | 19.34 | USD |
| The RBB Fund, Inc. Motley Fool Capital Efficiency 100 Index ETF | ARCX:TMFE | 26.78 | USD |
| ProShares Long Online Short Stores | ARCX:CLIX | 46.51 | USD |
| The Hoya Capital Housing ETF | ARCX:HOMZ | 45.68 | USD |
| Northern Lights Fund Trust IV Monarch Dividend Plus Index ETF | BATS:MDPL | 25.38 | USD |
| WisdomTree Japan Hedged Equity Fund | ARCX:DXJ | 110.09 | USD |
| WisdomTree Global ex-US Real Estate Indx | ARCX:WTRE | 17.42 | USD |
| SPDR Kensho New Economies Composite | ARCX:KOMP | 51.55 | USD |
| FlexShares Credit-Scored US Long Corp Bo | BATS:LKOR | 42.40 | USD |
| INVESCO S&P 500 GARP ETF | ARCX:SPGP | 104.89 | USD |
| iShares Future Cloud 5G and Tech ETF | ARCX:IDAT | 33.29 | USD |
| Tidal Trust II iREIT - MarketVector Quality REIT Index ETF | ARCX:IRET | 19.95 | USD |
| iShares JPX-Nikkei 400 ETF | ARCX:JPXN | 70.72 | USD |
| ETF Series Solutions AAM Transformers ETF | ARCX:TRFM | 38.80 | USD |
| Schwab Fndmntl Intl Sml Cmpny Indx | ARCX:FNDC | 34.04 | USD |
| Schwab Fndmntl US Brd Mkt Indx | ARCX:FNDB | 23.31 | USD |
| Invesco S&P 500 Quality ETF | XNYS:SPHQ | 67.90 | USD |
| FlexShares® High Yield Value-Scored Bond Index Fund | ARCX:HYGV | 40.64 | USD |
| LeaderSharesTM AlphaFactor® US Core Equity ETF | ARCX:LSAF | 40.90 | USD |
| Schwab Fd Us Sml Comp Index | ARCX:FNDA | 29.78 | USD |
| U.S. Diversified Real Estate | ARCX:PPTY | 32.01 | USD |
| iShares Edge MSCI USA Size Factor ETF | ARCX:SIZE | 149.59 | USD |
| TrimTabs ETF Trust Donoghue Forlines Tactical High Yield ETF | BATS:DFHY | 21.43 | USD |
| First Trust Nasdaq Lux Digital Health Solutions ETF | XNAS:EKG | 17.01 | USD |
| Invesco Nasdaq Free Cash Flow Achievers ETF | XNAS:QOWZ | 33.61 | USD |
| U.S. Global Jets ETF | ARCX:JETS | 25.14 | USD |
| IQ U.S. Large Cap R&D Leaders ETF | XNAS:LRND | 34.08 | USD |