Take Advantage of Mean-Reverting Prices With This Foreign Value ETF
Diversification and a low fee improve its appeal.
Foreign value exchange-traded funds are in short supply. To make matters more difficult, the few funds that are available tend to overweight stocks from certain sectors, like financials, which compromises their diversification. Schwab Fundamental International Large Company Index ETF (FNDF), with a Morningstar Analyst Rating of Bronze, has something to offer. It holds both value and growth stocks but tilts toward those trading at lower valuations than the market. This a well-diversified value strategy that can take advantage of mean-reverting prices wherever they occur.
This fund tracks the Russell RAFI Developed ex-U.S. Large Company Index. It targets large- and mid-cap stocks from overseas developed markets and weights its holdings based on sales (adjusted for leverage), retained operating cash flow, and dividends plus buybacks. When the fund rebalances, it will increase its exposure to stocks that have become cheaper relative to these metrics and underweight those that have become more expensive.
Daniel Sotiroff does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.