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Can you provide a link to the article? ("featured by Hulbert in today's Wall Street Journal"), or a copy and paste of the article.
I think you can learn a lot about the newsletter by studying FundX Upgrader, FUNDX. The portfolio managers of the fund are the same people who write the newsletter in question, e.g., Janet Brown. The mutual fund carries out the strategy of the newsletter.
With FUNDX you are paying an extra 1.1% to have the newsletter writers enact their portfolio based on their newsletter. Plus you pay the individual funds' expense ratios, which you would pay anyway if you carried out the strategy on your own, by subscribing to the newsletter and not purchasing FUNDX. So Morningstar shows the expense ratio to be about 1.91%, but consider 1.1% to be the fee you pay the managers plus administration of the fund, and the rest is the expense ratios of the funds themselves.
I can share one bit of experience about the newsletter. Although I've never subscribed, years ago I came across a few issues of it. There are a lot of 'transactions', buys and sells. I think it would be relatively uncommon to have a month or two with no transactions. It is a very active portfolio of mutual funds. The strategy of the newsletter is to always be in the funds with the best momentum. When a fund in the newsletter performs poorly, they don't hang around and wait for that fund to turn around and rebound. After a certain period of time, it will be kicked out and replaced by a fund with good performance momentum.
The strategy is something to the effect of [don't quote me on this, I'm just giving you an estimate] ranking the performance of mutual funds over different time periods, such as 1 year, 9 months, 6 months, 3 months, 1 month. They have a weighting system to overweight more recent performance vs. 12 month performance.
I believe the newsletter had awesome returns [consistently beat the market] for many years quite some time ago. I also believe that the returns in more recent years has not been very good, underperforming the market.
I can tell you without a doubt that FUNDX had excellent returns on inception and for some time after that, and has had subpar returns for the past 5 and 10 years. FUNDX has underperformed the S&P 500 by 0.5% annualized for 10 years, and by 3.5% annualized for 5 years. Actually, FUNDX has underperformed the S&P 500 for the past 1, 3, 5 and 10 years, per Morningstar.
That also means the newsletter in question has also underperformed for those periods, because as I mentioned, the authors of the newsletter carry out the newsletter's strategy in this mutual fund.
@Ted: Thanks for posting. I often get "locked out" when I try to access WSJ articles. The secret is finding the correct URL that allows access!
@kanmani: I subscribed to Hulbert's Financial Digest for many years, and followed the performance of a bunch of newsletters for a long period, including the one you are interested in.
NoLoad FundX was one of THE VERY best performers "forever". It was always on Hulbert's list of "The Best Performers" over 1 year, 3 years, 5 years, 10 years, 20 years, etc. It could do no wrong.
Then, as I posted above, the writers of the newsletter, Janet Brown 'and company', decided to carry out their strategy in a mutual fund, FUNDX....and I posted that FUNDX has lagged the S&P 500 over the past 10 years, 5 years, 3 years, 1 year!!
Success is fickle! You said you are "considering jumping into this."
You CANNOT know in advance if this newsletter is going to outperform or underperform the market. Repeat: You CANNOT know in advance........
That's the bottom line. The newsletter has enjoyed long periods of outperformance and long periods of underperformance. You might as well toss a coin........
I wouldn't bet the farm on this, unless you enjoy betting.
But the same can be said about any active mutual fund: You cannot know in advance if it will outperform or underperform the market.
What you CAN know is that a properly run index fund will come very close to the market return. Examples include VTSMX, VTI (the exchange traded counterpart), VXUS, Vanguard Total Intl Stock Index Inv VGTSX.
The WSJ article stated that "each of the three winners lagged behind the S&P 500 in more than half of the five-year periods since 1980."
So examine in advance what you would do if you went with the newsletter and invested according to it, and then went the next 5 years lagging behind the S&P 500. Most people would not have the 'faith' to continue with the newsletter and strategy. Most mere mortals would throw in the towel and find another investing methodology.
By the way, another of the 3 winning newsletters mentioned by Hulbert was the Prudent Speculator, edited by John Buckingham. He also has 2 mutual funds, VALUX and VALDX.
I see that while I have been typing, Charles has posted to this thread. Have no idea what he said. I'm just going to hit "Post Comment" and find out afterwards.
Hi rjb112, Ted and Charles, thanks for the feedback. Your comments are very helpful, will make this discussion forum the first step in my investment process.
@kanmani: You're welcome. Just a note, you probably already know from reading Hulbert that very few newsletters have been able to beat the return of a market index, such as a total market index like VTSMX or VTI. The VAST majority of newsletters underperform an index stock fund by a wide margin. Even most actively managed mutual funds underperform stock index funds. A lot of people have experienced disappointment from following newsletters and from investing in actively managed funds. It may make sense to consider indexing a portion of your investments, with a very low cost index provider like Vanguard, Fidelity, Schwab, or iShares. Just an idea.
I have not followed the newsletter and FUNDX, but the last time I looked FUNDX has lot more holdings than recommended by the newsletter. I think the newsletter suggests holding top two funds in the core class. Adding holdings may be necessary for the larger size of the fund (vs. individuals following the newsletter), but it may have diluted the performance. At one point, I was considering subscribing to it purely to get consolidated data for my own analysis and follow-up in my momentum portfolio.
I subscribed to FundX for a few years before 2008. My experience with the recommendations was generally good, but depending on how you try to follow the newsletter and what your transaction costs are it gets a bit unwieldy. In all the cases I remember I was able to hold funds past the point at which I would be penalized for frequent trading, but there were some cases where my brokerage, E*Trade, didn't offer the funds so I skipped it or bought the next one on the list.
I have seen the same on their more recent performance, which surprises me a little. I think their system should do better in trending markets and if the past 5 years hasn't been a pretty consistent trend I'm not sure what would work better for them.
For my own account, I eventually decided I would rather play the momentum game with individual stocks or ETF's that were liquid and easy to trade so I let my subscription expire.
Comments
I think you can learn a lot about the newsletter by studying FundX Upgrader, FUNDX.
The portfolio managers of the fund are the same people who write the newsletter in question, e.g., Janet Brown. The mutual fund carries out the strategy of the newsletter.
With FUNDX you are paying an extra 1.1% to have the newsletter writers enact their portfolio based on their newsletter. Plus you pay the individual funds' expense ratios, which you would pay anyway if you carried out the strategy on your own, by subscribing to the newsletter and not purchasing FUNDX. So Morningstar shows the expense ratio to be about 1.91%, but consider 1.1% to be the fee you pay the managers plus administration of the fund, and the rest is the expense ratios of the funds themselves.
I can share one bit of experience about the newsletter. Although I've never subscribed, years ago I came across a few issues of it. There are a lot of 'transactions', buys and sells. I think it would be relatively uncommon to have a month or two with no transactions. It is a very active portfolio of mutual funds. The strategy of the newsletter is to always be in the funds with the best momentum. When a fund in the newsletter performs poorly, they don't hang around and wait for that fund to turn around and rebound. After a certain period of time, it will be kicked out and replaced by a fund with good performance momentum.
The strategy is something to the effect of [don't quote me on this, I'm just giving you an estimate] ranking the performance of mutual funds over different time periods, such as 1 year, 9 months, 6 months, 3 months, 1 month. They have a weighting system to overweight more recent performance vs. 12 month performance.
I believe the newsletter had awesome returns [consistently beat the market] for many years quite some time ago. I also believe that the returns in more recent years has not been very good, underperforming the market.
I can tell you without a doubt that FUNDX had excellent returns on inception and for some time after that, and has had subpar returns for the past 5 and 10 years. FUNDX has underperformed the S&P 500 by 0.5% annualized for 10 years, and by 3.5% annualized for 5 years. Actually, FUNDX has underperformed the S&P 500 for the past 1, 3, 5 and 10 years, per Morningstar.
That also means the newsletter in question has also underperformed for those periods, because as I mentioned, the authors of the newsletter carry out the newsletter's strategy in this mutual fund.
Hope that helps.
Regards,
Ted
@kanmani: I subscribed to Hulbert's Financial Digest for many years, and followed the performance of a bunch of newsletters for a long period, including the one you are interested in.
NoLoad FundX was one of THE VERY best performers "forever". It was always on Hulbert's list of "The Best Performers" over 1 year, 3 years, 5 years, 10 years, 20 years, etc. It could do no wrong.
Then, as I posted above, the writers of the newsletter, Janet Brown 'and company', decided to carry out their strategy in a mutual fund, FUNDX....and I posted that FUNDX has lagged the S&P 500 over the past 10 years, 5 years, 3 years, 1 year!!
Success is fickle! You said you are "considering jumping into this."
You CANNOT know in advance if this newsletter is going to outperform or underperform the market. Repeat: You CANNOT know in advance........
That's the bottom line. The newsletter has enjoyed long periods of outperformance and long periods of underperformance. You might as well toss a coin........
I wouldn't bet the farm on this, unless you enjoy betting.
But the same can be said about any active mutual fund: You cannot know in advance if it will outperform or underperform the market.
What you CAN know is that a properly run index fund will come very close to the market return. Examples include VTSMX, VTI (the exchange traded counterpart), VXUS, Vanguard Total Intl Stock Index Inv VGTSX.
The WSJ article stated that "each of the three winners lagged behind the S&P 500 in more than half of the five-year periods since 1980."
So examine in advance what you would do if you went with the newsletter and invested according to it, and then went the next 5 years lagging behind the S&P 500. Most people would not have the 'faith' to continue with the newsletter and strategy. Most mere mortals would throw in the towel and find another investing methodology.
By the way, another of the 3 winning newsletters mentioned by Hulbert was the Prudent Speculator, edited by John Buckingham. He also has 2 mutual funds, VALUX and VALDX.
I see that while I have been typing, Charles has posted to this thread.
Have no idea what he said. I'm just going to hit "Post Comment" and find out afterwards.
have diluted the performance. At one point, I was considering subscribing to it purely to get consolidated data for my own analysis and follow-up in my momentum portfolio.
I have seen the same on their more recent performance, which surprises me a little. I think their system should do better in trending markets and if the past 5 years hasn't been a pretty consistent trend I'm not sure what would work better for them.
For my own account, I eventually decided I would rather play the momentum game with individual stocks or ETF's that were liquid and easy to trade so I let my subscription expire.