Six Favorite Index Funds for a “Chartist”

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Last month, our Actual Cash Account topped the $2 million mark for the first time in its history stretching back to August of 1988 when it as funded with $100,000. Since our last issue, this real money account has gained an additional $112,195, observes Dan Sullivan, editor of The Chartist Mutual Fund Letter.

Many sophisticated stock market participants are getting worried. It is no secret that the public invariably becomes enamored with the stock market during the final stages of bull markets. There is not much doubt that this is the case at the present time.

While many hedge funds and large investors have been pulling back, the public has been on a buying binge. The obvious question is “Are we getting ready to head for the exits?” The answer is “No.”

While the market is extended with a correction overdue, it does not necessarily signal the demise of the bull market. In fact with our models in a highly bullish mode, we intend to give this bull market every benefit of the doubt.

Granted, by historical yardsticks, the bull market is mature. But the very fact that it has lasted this long, places the odds firmly in favor of it prevailing.  As a rule of thumb, the longer a trend has endured, the greater the odds are that it will continue to endure.

As usual, our long-term models that are telling us to stay fully invested will point the way. In the meantime, here’s an overview of some recent mutual fund and ETF recommendations.

Schwab U.S. Dividend Equity (SCHD) seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Dividend 100 Index. The fund generally invests in stocks that are included in the index.

The index is designed to measure the performance of high dividend yielding stocks issued by U.S. companies that have a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios.

The fund invests at least 90% of its net assets in stocks that are included in the index. It has an expense ratio of 0.06% and a 5-star rating from Morningstar for the past 3 years.

Schwab U.S. Mid-Cap (SCHM) seeks to track as closely as possible, before fees and expenses, the total return of the Dow Jones U.S. Mid-Cap Total Stock Market Index. The index includes the mid-cap portion of the Dow Jones U.S. Total Stock Market Index actually available to investors in the marketplace.

The includes the components ranked 501-1000 by full market capitalization. The index is a float-adjusted market capitalization weighted index. The fund will invest at least 90% of its net assets in securities that are included in the index. It has an expense ratio of 0.04% and a 3-star rating from Morningstar for the past 3 years.

iShares Russell 1000 Value (IWD) seeks to track the investment results of the Russell 1000 Value Index (the “underlying index”), which measures the performance of large- and mid-capitalization value sectors of the U.S. equity market.

The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index.

It may invest the remainder of its assets in certain futures, options and swap contracts, cash and cash equivalents, as well as in securities not included in the underlying index, but which the advisor believes will help the fund track the underlying index. It has an expense ratio of 0.19% and a 3-star rating from Morningstar for the past 3 years.

iShares Russell 2000 Growth (IWO) seeks to track the investment results of the Russell 2000 Growth Index, which measures the performance of the small-capitalization growth sector of the U.S. equity market. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index.

It may invest the remainder of its assets in certain futures, options and swap contracts, cash and cash equivalents, as well as in securities not included in the underlying index, but which the advisor believes will help the fund track the underlying index. It has an expense ratio of 0.24% and a 2-star rating from Morningstar for the past 3 years.

Vanguard Value Index Fund (VTV) seeks to track the performance of the CRSP US Large Cap Value Index that measures the investment return of large-capitalization value stocks.

The fund employs an indexing investment approach designed to track the performance of the CRSP US Large Cap Value Index, a broadly diversified index predominantly made up of value stocks of large U.S. companies.

The advisor attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. It has an expense ratio of 0.04% and a 4-star rating from Morningstar for the past 3 years.

SPDR S&P Dividend (SDY) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P High Yield Dividend Aristocrats Index. The fund generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index.

The index is designed to measure the performance of the highest dividend yielding S&P Composite 1500 Index constituents that have followed a managed-dividends policy of consistently increasing dividends every year for at least 20 consecutive years. It has an expense ratio of 0.35% and a 4-star rating from Morningstar for the past 3 years.

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