Jacobs: Sweet on Schwab

01/02/2004 12:00 am EST


Sheldon Jacobs

Author, Investing Without Wall Street, Five Essentials for Financial Freedom

Sheldon Jacobs has long been known as the "dean of no-load funds", having written his first book on no-loads in 1974. For the 2003 Top PIcks report, he selected the relatively conservative Vanguard Tax-Managed Small Cap, a position that returned 36% over the year. This year, he opts for Schwab Dividend Equity

"Dean of the no-load fund-watchers." He has earned that accolade by championing no-load funds ever since he wrote the first book on no-loads back in 1974. Mr. Jacobs is now the editor and publisher of The No-Load Fund Investor advisory newsletter--the only newsletter, as of 2002, to make the coveted Forbes magazine "Honor Roll" of financial newsletters six times. In addition, the Investor was named #1 mutual fund newsletter in America for the ten years ending November 2000."

"Here’s an unusual opportunity for income oriented investors. The Schwab Dividend Equity Fund (SWDIX ) was launched September 2, 2003. It seeks lower volatility and higher yield than the S&P 500.  We’re recommending it for two reasons:

1) It’s waiving all expenses through May 3, 2004. This means a 0.0% expense ratio at this time! As a result its current 30-day yield is 3.19%. Without waivers, the yield would have been 1.99%. After May the expense ratio will be limited to 1.1% until February 2005. This is a very good deal, although note that you will have to hold the fund for 180 days to avoid paying a Schwab transaction fee.

2) Good performance:  Schwab Dividend Equity gained 8.5% in its first three months since inception. By way of comparison the average growth-income fund lost 0.7% in this same period. Given the strong run ups in the aggressive fund categories and the more favorable tax treatment of dividends we believe this is an excellent fund for investors in 2004."

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