Schwab Fundamental Index Funds are equity index funds with a different orientation: While most equity indices are generally weighted by market capitalization, the Fundamental Index series selects and weights stocks based on fundamental financial measures.
Distinguishing Characteristics & Benefits
- Schwab Fundamental Index Funds provide access to the innovative fundamental index methodology created by Rob Arnott, chairman of Research Affiliates®. The Funds passively track the Russell Fundamental Index® Series, which ranks stocks by equally weighting three fundamental measures of company size: retained operating cash flow, adjusted sales, and dividends plus buybacks. Market capitalization, price or valuation multiples are not considered.
- The basis of the Funds' methodology is this: Cap-weighted indices have a tendency to overweight overpriced stocks and underweight undervalued ones, thereby creating a performance drag. By avoiding this potential shortcoming, the Fundamental Index® methodology offers a complement to traditional cap-weighted indexing and active management, helping to create more attractive risk-adjusted portfolios.
- Charles Schwab Investment Management (CSIM) has an exclusive license to broadly offer investment companies tracking certain indexes within the Russell Fundamental Index® Series.
Schwab Fundamental Index Funds represent a unique approach to investing. The suite of index investments:
- Leverages the methodology of Research Affiliates®, a pioneer of Fundamental Index strategies
- Tracks Russell Fundamental Index Series created by Russell Investments, a leader in institutional benchmarks
- Managed by the expertise of Charles Schwab Investment Management