Bernie Schaeffer

Like Funds, Newsletters That Sink Can Swim

October 18, 2007

Mark Hulbert has been tracking financial newsletter performance (via the Hulbert Financial Digest) longer than anyone else.

Judging financial newsletters by their past performance is just about as useless as judging mutual funds by their past performance. Top performing financial newsletters one year can be at the bottom of the heap the next.

As we’re coming up on the 20th anniversary of the greatest one day drop in stock market history, Hulbert took a look at some of the best and worst performing newsletters during the 1987 crash, and how they did afterwards:

On the whole, the best performers during the 1987 Crash have been below-average performers ever since, and vice versa. As an example, consider one of the newsletters with the best performances during the month of October 1987: Bernie Schaeffer's Option Advisor, with a gain of 61.5%, according to the Hulbert Financial Digest, in contrast to a 24.5% loss that month for the Dow Jones Industrial Average Since then, according to the HFD's calculations, it has produced a 3.4% annualized loss, and is very near the bottom of the HFD's performance rankings for performance over the past 20 years."

This means that doing well in a crash environment can mean crummy performance in a non-crash environment. Conversely, newsletters portfolios that fall hardest in down markets can perform very well post crash. The Prudent Speculator, a financial newsletter that performed poorly during the crash, has posted “… an annualized gain of 21.5%..[since 1987].”

It’s also interesting to note that Bernie Schaeffer’s newsletter has a negative twenty year track record (while the S&P 500 climbed more than 600% with dividends including the crash of 1987), but he still has a vibrant newsletter business and is sought after for market opinions and analysis.

Only four mutual funds have posted a worse performance than Shaeffer’s newsletter in the last twenty years. They are either gold funds, bear funds, or sky high expense ratio funds with no assets.


Syndicate content