Winning the long game—Canadian style

American children’s author E. L. Konigsburg observed about honor rolls: “By the time they get to sixth grade, honor roll students won’t risk making a mistake; and sometimes to be successful, you have to risk making mistakes.” The Investment Reporter is long past the sixth grade. It was founded in 1941 and every week of the year for over 77 years The Investment Reporter has risked making mistakes.

Winning the long game - Canadian style

Hulbert’s Honor Roll includes only those investment newsletters with above-average performance in both up and down markets.

With only one Canadian investment newsletter making the grade, senior columnist Mark Hulbert of MarketWatch, a Dow Jones publication, includes The Investment Reporter (a sister publication of Investor’s Digest of Canada) on The Hulbert 2018-19 Investment Newsletter Honor Roll.

Mr. Hulbert, who is also founder of The Hulbert Financial Digest, independently tracks the advice of more than 160 investment advisory newsletters. Of the newsletters tracked, only six got on his Honor Roll.

Mr. Hulbert’s digest has measured the performance of The Investment Reporter for more than 30 years. It tracks the performance of the 80-some stocks contained in The Investment Reporter list of “Key Stocks for Your Portfolio”. Hulbert conducts its analysis independently. No influence whatsoever.

Mr. Hulbert cites the annualized gain of The Investment Reporter since April 2000, as being 11.7 per cent—the highest of all who made it to the Honour roll. Under the headline “Hulbert on Investing: Advisers who Deliver Low-Anxiety Returns”, The Wall Street Journal has previously quoted the Hulbert service: “The goal [of the Honor Roll] isn’t to identify advisers who make the most money at all costs, but rather the ones whom risk-averse investors can live with through thick and thin.”

Mr. Hulbert points out, “I include on the Honor Roll only those advisors with above-average performance in both up and down markets. You’d think that making it onto this Honor Roll would be relatively easy. After all, if advisors’ up and down market returns were unrelated to each other, you’d expect—on the basis of randomness alone—that 25 per cent of advisors would have above-average returns in both up and down markets.

“In fact, however, fewer than 10 per cent do. That is our first indication that making it onto the Honor Roll really means something.” Identifying the ideal type of advisor for investors to follow, Mr. Hulbert is keen to note that advisors should “possess a decent but unspectacular track record who merely matches the market’s return when it’s going up but loses less when it is declining.

“That’s because the key to long-term financial success is sticking with an advisor or strategy through thick and thin. And most investors who follow high-flying advisors end up discovering that they don’t have the level of commitment and intestinal fortitude that are required.

“As a result, most investors who start following such advisors get rid of them at or near the end of the next bear market. As a result, they suffer almost all of those advisors’ bear market losses yet benefit from only a fraction of their bull market potential.

“That’s why the less glamorous advisor is to be preferred. Even though his track record appears to be inferior, you most likely will make more money following him over the long term than by going with the one whose track record appears to be superior. Slow and steady wins the race.

“Still, it is worth noting that over the past 15 years, on average, the model portfolios of newsletters that have made it onto my past Honor Rolls have been 31 per cent less risky than the newsletters that did not make it onto the Honor Roll, as measured by the volatility of their returns. And, yet, over the last decade, they have done better than those non-Honor-Roll newsletters—by 2.7 annualized percentage points.

“It’s a winning combination to perform better with less risk, of course.”

Mark Hulbert has been analyzing and ranking investment advisory newsletter performance since 1980. You can learn more about The Hulbert Financial Digest and his Investment Newsletter Honor Roll by going to http://hulbertratings.com/honor-roll/.

This is an edited version of an article that was originally published for subscribers in the December 7, 2018, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.

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