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FA Center: These top investment newsletters beat the stock market using this one impressive strategy


Outperforming the stock market is boring stuff. I’m not referring to what it feels like to beat the market over the long term, which is exhilarating. I’m instead referring to the process it takes to get there.

Rarely will the strategies you can actually follow through thick and thin be the performance leaders in any given year. They instead hold out the decidedly unexciting promise of being merely above-average performers in most years.

This is perhaps the most important investment lesson I draw from my annual Honor Roll of investment newsletters. Other newsletter services will more frequently show up at the top of the performance scoreboards for quarterly or annual returns. But those other services will also more frequently show up near the bottom of other quarterly or annual rankings.

While these other services offer excitement, their followers all too often end up throwing in the towel. So even when these other services produce excellent long-term returns, and some do, few subscribers will have achieved them.

That’s why above-average newsletter services that you can live with in all investing environments are more likely to lead to long-term success. To use a baseball analogy, the player most likely to help a team win the World Series is someone with a great on-base percentage, as opposed to someone who hits lots of home runs but often strikes out. That’s even though fans get far more excited about a home run than a base hit.

Honor roll methodology

To identify newsletters that are consistently above-average performers, I segregated their track records over the past two decades into what was produced in bull markets and in bear markets. Only newsletters that beat the market in both made my Honor Roll. (A fuller description of how I constructed the Honor Roll is available here.)

You might be concerned that the criteria I used to construct the Honor Roll are too lenient, since being above-average hardly seems much of a hurdle. It actually is quite a high bar when applied to both up- and down markets. Over the years in which I have been constructing my Honor Roll, only about 10% of monitored advisers make the grade.

For anyone who argues that following merely above-average advisers consigns yourself to mediocre returns, consider the performance of Honor Roll newsletters over the past 15 years. To calculate the Honor Roll’s track record, I constructed a hypothetical portfolio which each year was divided equally among the newsletters making that year’s Honor Roll.

This hypothetical portfolio proceeded to “invest” in these newsletters’ model portfolios for the subsequent year, after which it would reallocate itself among the newsletters on the subsequent year’s Honor Roll. Over the past 15 years this portfolio did 1.2 percentage points better than a comparable portfolio of newsletters that did not make the Honor Roll — with significantly less volatility or risk.

Performance or excitement?

Even though the Honor Roll newsletters on average have proven themselves able to beat non-Honor-Roll newsletters with less risk, it is true that many investors are looking for more excitement than “slow and steady wins the race.” There’s nothing wrong with a desire for excitement. You just need to be clear about what you’re seeking.

To illustrate the importance of properly acknowledging the need for excitement, consider Theo Epstein, who pioneered the disciplined, data-driven approach to assembling a baseball team’s roster that is known as analytics. Epstein resigned two years ago as president of baseball operations for the Chicago Cubs because he recognized that, while his data-driven approach had been successful, it had made the game boring. “Executives like me, who have spent a lot of time using analytics and other measures, have unwittingly had a negative impact on the aesthetic value of the game and the entertainment value of the game,” Epstein said.

The Honor Roll approach I am urging in this column is the investment arena’s equivalent to Epstein’s data-driven, boring approach to baseball.

Full disclosure: Each of the newsletters whose returns are audited by Hulbert’s performance tracking firm paid a flat fee to have their returns calculated. That flat fee means Hulbert has no incentive to put some newsletters on the Honor Roll and not others.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at

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