What has been the major results of studying the performance of investment newsletters?

Answer 1

Long term studies on the performance of investment newsletters have shown that it is exceedingly difficult over the long term to consistently outperform a broad based market index such as the Standard & Poor's 500. In addition, comparing the returns of investment newsletters to the overall market is a complex task since many investment newsletters are not fully invested in stocks 100 per cent of the time. As a result, the returns of investment newsletters have to be expressed as "risk adjusted returns" (depending upon how much of an investment newsletter portfolio is allocated to cash) which clouds the comparison to a portfolio always 100 per cent invested in stocks. Theoretically a portfolio not fully invested in stocks should have less volatility and therefore less risk but not being fully invested during a bull market results in the risk that an investor will under perform the market. Studies by the Hulbert Financial Digest, which has been monitoring investment newsletters for two decades shows that some stock advisors have great track records but very few can consistently outperform the overall returns of the Stock Market. The best investment strategy for most investors would be to take the advice of Warren Buffett and invest in a low cost S&P 500 index fund such as the one run by Vanguard Group.