What is a Hulbert rating?
The Hulbert rating measures the performance of an investing newsletter over time. Paid investment newsletters provide trading tactics, stock recommendations, and economic analysis. Some newsletters specialize in options trading, utilities, precious metals, or cryptocurrency investing. Hulbert Ratings, LLC provides risk-adjusted long-term performance ratings for newsletters.
How Hulbert Rates Work
Investment newsletter Hulbert ratings are based on their buy-and-sell advice and hypothetical portfolios. Hulbert Ratings, LLC evaluates newsletter performance using several parameters, resulting in a Sharpe ratio, a risk-adjusted performance measure.
In 1980, financial adviser and contrarian investor Mark Hulbert started measuring newsletter performance in the Hulbert Financial Digest. Hulbert Financial Digest ended in January 2016 after 36 years and several notable purchases. Hulbert quickly founded Hulbert Ratings LLC to continue newsletter performance tracking after the digest. Newsletters pay Hulbert Ratings LLC a set price for tracking and auditing.
To avoid newsletters from providing advice early and inflating the hypothetical portfolio, Hulbert subscribes under a different name to evaluate each newsletter impartially. Some newsletters include vague invitations to action. Those require Hulbert Ratings, LLC, to infer purchase and sell advice to track returns.
In addition to providing an objective analysis of newsletter performance, Hulbert ratings maintain honesty in newsletters (also known as market letters).
Special Considerations
Performance scoreboards on the Hulbert Ratings LLC website display Hulbert ratings. Performance scoreboards provide weekly ratings for the past 12 months and history ratings spanning 3, 5, 10, 15, 20, and 30 years. Newsletter performance ratings date back to 1980.
Newsletter Honor Roll
The Hulbert Investment Newsletter Honor Roll includes newsletters that outperformed in up-and-down markets. The list ranks each newsletter’s up-and-down performance and shows its gain from April 2000.5
Each newsletter receives a risk rating based on its performance volatility and the standard deviation of monthly returns. Each newsletter also receives a Sharpe ratio-adjusted performance number.
Investment Newsletters: Worth It?
One thing is evident after decades of Hulbert ratings: Typically, newsletters and actively managed mutual funds underperform the market. Hulbert agrees with the common knowledge that investors should invest in index funds and keep them despite advanced hedging tactics and analytical tools. Hulbert even claims that most portfolio adjustments are errors.
However, Hulbert defends newsletters as valuable due to the vulnerability of human psychology. According to Hulbert, ordinary investors cannot follow the index fund approach as they tend to panic in a down market and sell cheaply. Hulbert favors a suboptimal approach where he follows financial newsletters’ buy-and-sell advice rather than the ideal strategy of investing in an index fund and holding during downturns.
Investors should note that most actively managed funds and portfolios underperform the market when choosing investing strategies.
Conclusion
- Financial expert Mark Hulbert devised the Hulbert grade to assess the success of investment newsletters.
- The Hulbert rating uses measures to assess investing, buy and sell advice, and calculate a risk-adjusted performance score.
- Hulbert Financial Digest, bought by MarketWatch/Dow Jones in April 2002, issued newsletter rating rankings for over 36 years.
- While MarketWatch/Dow Jones discontinued the Hulbert Financial Digest in 2016, Mark Hulbert launched Hulbert Ratings, LLC, to produce newsletter ratings.
- Hulbert ranks investing newsletters that outperformed in up-and-down markets in its newsletter honor roll.
