A Hulbert rating is a score that tracks the performance of investment newsletters over time. These newsletters, usually part of paid subscriptions, offer a variety of market-related information, including trading strategies, stock recommendations, and economic commentary. Many newsletters specialize in specific industries or types of trading, like options trading, utilities, precious metals, or cryptocurrency. Hulbert Ratings, LLC assigns these ratings to help investors evaluate a newsletter by its long-term performance adjusted for risk.
Key Takeaways
- A Hulbert rating is an investment newsletter score designed to track the performance of investment newsletters over time.
- The rating tracks buy and sell advice and evaluates performance using various metrics culminating in a risk-adjusted performance score.
- For nearly 36 years, newsletter ratings were published in the Hulbert Financial Digest, which was acquired by MarketWatch/Dow Jones in 2002, before ceasing in 2016. Subsequently, ratings were continued by Hulbert Ratings, LLC.
- A newsletter honor roll is published, grading investment newsletters that perform well in both up and down markets.
How a Hulbert Rating Works
The Hulbert ratings for investment newsletters are determined by maintaining hypothetical investment portfolios based on each newsletter’s buy and sell advice. Several performance metrics are tracked, and a final measure represented by the Sharpe ratio—an indicator of risk-adjusted performance—is used. Financial advisor and contrarian investor Mark Hulbert began this tracking in the early 1980s.
After the closure of Hulbert Financial Digest in 2016, Hulbert Ratings LLC was formed to continue the performance tracking. Newsletters pay a flat fee for the Hulbert Ratings service, which remains unbiased as all subscriptions are in a name other than Mark Hulbert’s, preventing early tips and inflated performance scores. These ratings not only provide a fair assessment but also help maintain honesty in the publicizing of newsletter performance.
Special Considerations
Performance scoreboards and historical ratings are published on the Hulbert Ratings LLC website, displaying newsletter ratings over various periods, ranging from one year to over 30 years back. Even since its inception in 1980, rankings and performance data remain accessible.
Newsletter Honor Roll
The Hulbert Investment Newsletter Honor Roll showcases those investment newsletters that performed above average in both up and down markets. Each newsletter’s grade is detailed for up and down periods, including its gains since April 2000. Each newsletter is assigned a risk number indicating performance volatility based on standard deviation, and a separate risk-adjusted performance number via the Sharpe ratio.
Are Investment Newsletters Worth It?
Over decades of Hulbert ratings, a clear pattern has emerged: most newsletters, like many actively managed mutual funds, tend to underperform the market. Despite sophisticated techniques, Hulbert concluded that investing in an index fund and holding it is usually more profitable. However, acknowledging human psychology’s flaws, Hulbert contends that the average investor likely cannot stick to this optimal strategy due to panic in down markets. Thus, they might benefit more from following a consistently suboptimal strategy like the advice in an investment newsletter rather than inconsistently sticking to the optimal index fund strategy. While opinions vary, it’s crucial to remember that most actively managed investments underperform the market when crafting investment strategies.
Related Terms: investment advice, portfolio, Sharpe ratio, contrarian, market letter, volatility, underperform, index fund, bear market.
References
- Hulbert Ratings. “About”.
- Hulbert Ratings. “About”.
- Hulbert Ratings. “Investment Newsletter Performance”.
- Hulbert Ratings. “Performance Scoreboards”.
- Hulbert Ratings. “The Hulbert 2020-2021 Investment Newsletter Honor Roll”.
