Two years of watching mutual funds get ripped by the market has many investors looking for help. But choosing from among dozens of fund newsletters can be almost as difficult as selecting investments from among thousands of funds.
For people looking for structured investment advice without hiring a financial counselor, the right newsletter offers comfort in selecting investments, structuring a portfolio and implementing investment strategy. The wrong newsletter, however, can cost a lot more than just its subscription price.
“There are all types of newsletters out there, but they’re not all equal,” says Mark Hulbert of Hulbert Financial Digest, which analyzes the performance of stock- and fund-picking newsletters. “Just as there are good mutual funds that might not be your style, you have to look for a newsletter that combines a good track record with the other characteristics you’re looking for.”
If you’re looking for a newsletter, consider the following:
– Do you want a strategy to follow or just names and ratings of funds?
Decide first what you are looking for. If you want names, ratings and maybe a growth projection around which you can build your own portfolio, for example, you’ll want to avoid newsletters laden with market-timing signals. You may instead appreciate recommended portfolios that you might emulate.
Check out what’s available. Since most newsletters send free samples, you’ll learn quickly which ones are appealing enough to inspire your investing confidence. (The Hulbert Financial Digest’s list of newsletters is online at the CBS Marketwatch Web site. Go to cbs.marketwatch.com/news/newsletters/ and look for the “directory.”)
– What style of newsletter best fits your needs?
Some newsletters provide little more than technical charts showing why to move into or out of key sectors. Others provide detailed commentary on a wide range of fund issues and offer ratings not only for recommended funds but for hundreds of others that the publisher keeps in its database.
There are newsletters that use e-mails or call-in hotlines to make daily or weekly updates, and there are newsletters that simply arrive in the mail once every month.
– How many portfolios does the newsletter offer?
There is no “right” number, but make sure the offerings meet your needs. That may be portfolios for people at different age ranges and risk tolerances, so that your strategy evolves from one to the next over time. It may be a one-size-fits-all strategy, particularly if it involves a market-timing model.
If you want a newsletter as a guide, rather than to follow its exact strategy, more portfolios will be better because they’ll give you some idea of different asset allocation strategies to follow.
– How have the newsletter’s picks performed?
Don’t rely on the newsletter’s own interpretation of its performance, because some publishers have been known to tweak the numbers. Hulbert Financial Digest is the only newsletter that rates newsletters (for a sample copy, call 888-HULBERT). It has more than 160 in its database, which extends back more than 20 years.
If a newsletter is not tracked by Hulbert, be sure to at least gauge its results against the performance of other newsletters, rather than simply measuring it against the broader stock market.
For newsletters with multiple portfolios, see how the strategy that most interests you has performed, relative to the newsletter’s overall track record. Some newsletters have 20 or more portfolios, and while a few may look great, the overall average may be mediocre; performance should indicate strategic ability, rather than trying one of everything to find something that works.
– Can you actually do what the newsletter suggests?
You can only duplicate a newsletter’s results if you can mimic its strategy. Don’t rush to invest right away. Paper-trade the portfolio–following strategy to the letter but without money involved–for three to six months to see how the advice fits in with your life; you might even set up phantom portfolios for several newsletters to decide which is best for you.
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Charles Jaffe is mutual funds columnist at the Boston Globe. He can be reached by e-mail at jaffe@globe.com or at the Boston Globe, Box 2378, Boston, Mass. 02107-2378.
