3 New Mutual Funds from Schwab

Yesterday, Charles Schwab & Co launched 3 open-end mutual-funds to track benchmarks based on valuation criteria that fund managers often use to pick stocks. This differs from traditional benchmarking, which takes market capitalization into account to weight holdings.

Robert Arnott, chairman of Research Affiliates, a Pasadena, CA based company, developed these so-called fundamental indexes. Instead of weighting stocks by market capitalization, Arnott's method evaluates stocks on metrics such as book values, cash flow, sales and gross dividends. His firm teamed up with index-provider FTSE Group to create and run the benchmarks for Schwab's newest mutual-fund offerings.

Those are Schwab Fundamental U.S. Large Company Index Fund (SFLVX) and Schwab Fundamental U.S. Small-Mid Company Index Fund (SFSVX) and Schwab Fundamental International Large Company Index Fund (SFNVX) which follows an all-world index, minus the U.S., and covers the 1,000 largest companies in the developed world, including Canada.

These open-end mutual funds carry expense ratios of 0.59% and require an initial investment of $2,500 in taxable accounts. Two other classes are available as well, ranging in minimums of $50,000 to $500,000. The upper-end requirements are focused towards advisers, who can pull their clients' assets and buy into the fundamentally based funds for 0.35%.