A New Twist on Index Funds A new twist on an old concept shakes up the index fund universe. With some research and observation, it could work for you.

Index mutual funds are as simple as they are cheap, with returns that outpace a majority of the investing public every year. What's not to like?

Plenty, for those who consider themselves value players--investors who prefer out-of-favor sectors or beaten-down stocks. Because indexes like the S&P 500 are ranked by companies' market caps, index mutual funds tend to boost the weight of well-to-do companies and decrease that of struggling ones. Some say traditional index funds follow a de facto growth strategy rather than a value one. To rectify this, WisdomTree Investments and Research Affiliates launched twists on the index-fund concept with fundamental indexing. The idea is to peg an index to something other than stock prices. WisdomTree's Total Dividend Fund, for example, includes NYSE, Amex and Nasdaq global stocks that pay regular dividends. As an exchange-traded fund, it charges 0.28 percent in expenses--more than the 0.19 percent charged by a traditional indexer like Vanguard's Total Stock Market Index Fund, but less than the expenses of actively managed options.

WisdomTree promotes its fundamental indexing with ETFs (30 at last count) pegged to stocks within a particular sector that pay dividends. Research Affiliates works through pension funds or other firms. But its idea of using "financial, price-indifferent measures of company size to weight stocks in an index" will surely catch on.