Almost a decade after selling his well-regarded The No-Load Fund Investor newsletter, former editor Sheldon Jacobs is still a fan of mutual funds and exchange-traded funds, just not necessarily to buy and hold.

Erratic stock markets such as this one call for nimble moves. "Think about market timing," Jacobs said in a recent telephone interview. Tactical market timing, he noted, can help an investor dodge the worst of stocks' volatility.

Jacobs doesn't go for trendy, alternative investment products. He doesn't believe most people should own individual stocks. But he strongly supports -- and even prefers -- so-called fundamental indexing, which challenges the traditional market-value, or capitalization-weighted, construction of standard benchmarks such as the Standard & Poor's 500 Index ($SPX) .

Funds that focus on a company's business fundamentals, Jacobs points out, recognize the changed landscape for investors post-2008. To Jacobs, this less-forgiving environment of lower investment returns, what's often called the "new normal," requires unorthodox measures if you hope to outperform.

A fundamental index is equipped for hostile terrain. In these portfolios, cash flow, book value, sales and dividends matter most. Advocates say this strategy steers investors clear of speculative markets and high-flying stocks that can fall hard and fast.

For example, fundamentally weighted PowerShares FTSE RAFI US 1000 Portfolio (PRF) has its greatest exposure to financial-services stocks and gives just 0.6% of its portfolio to Apple (AAPL) . In contrast, the largest U.S. stock by market value reflects more than 4% of the cap-weighted iShares Russell 1000 Index Fund (IWB) , which counts technology as its top sector.

Over the past three years through July 5, the PowerShares exchange-traded fund has delivered a 19.2% annualized gain, while its iShares rival is up 17.6%, according to investment researcher Morningstar. Moreover, so far in this year's seesaw market, the PowerShares fund's 7.8% return is more than double the iShares fund's 3.4% gain.

Investors can certainly stick to broad, cap-weighted stock-index funds, Jacobs said -- he owns shares in the Vanguard Total Stock Market Index Fund (VTSMX) , for instance. Just be careful not to get caught up in the euphoria of a cap-weighted market bubble.

Jacobs suggests that investors keep a 50-50 split between cap-weighted and fundamentally weighted products. Other stock-index funds he recommends include the cap-weighted Vanguard FTSE All-World ex-U.S. Index Investor Fund (VFWIX) and Fidelity Small Cap Enhanced Index Fund (FCPEX) as well as the fundamental PowerShares FTSE RAFI US 1500 Small-Mid Portfolio Fund (PRFZ) .

Also making Jacobs's list are products from Charles Schwab (SCHW) , which offers both cap-weighted and fundamental index funds. Among his favorites: Schwab Total Stock Market Index Fund (SWTSX) and its fundamental peer, SchwabFundamental U.S. Large Company Index Fund (SFLNX) .

For investors who use exchange-traded funds, Jacobs has assembled a portfolio of Vanguard Total Stock Market (VTI) , PowerShares FTSE RAFI US 1000, Vanguard Small Cap (VB) , iShares MSCI EAFE (EFA) and SPDR S&P International Small Cap (GWX) .

Bond holdings in this all-ETF mix include iShares Barclays 7-10 Year Treasury Bond Fund (IEF) and Vanguard Intermediate Term Bond (BIV).

"I'm really interested in simplifying matters," Jacobs said. "You can do a very adequate job of investing with virtually no work at all."

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