A newsletter can help you invest, but select it carefully

Your Funds

Dollars & Sense

May 19, 2002|By CHARLES JAFFE

CHOOSING from among dozens of mutual fund newsletters can be extremely difficult.

For people looking for structured investment advice without hiring a financial counselor, the right newsletter offers comfort in selecting investments, structuring a portfolio and implementing investment strategy.

The wrong newsletter, however, can cost a lot more than just its subscription price.

"There are all types of newsletters out there, but they're not all equal," says Mark Hulbert of Hulbert Financial Digest, which analyzes the performance of stock- and fund-picking newsletters. "Just as there are good mutual funds that might not be your style, you have to look for a newsletter that combines a good track record with the other characteristics you're looking for."

If you're looking for a newsletter, consider the following:

Do you want a strategy to follow or just names and ratings of funds? If you want names, ratings, and maybe a growth projection around which you can build your own portfolio, for example, you'll want to avoid newsletters laden with market-timing signals. You might instead appreciate recommended portfolios that you might emulate.

Check out what's available. Most newsletters send free samples, so you'll learn quickly which ones are appealing enough to inspire your investing confidence. (The Hulbert Financial Digest's list of newsletters is online at the CBS Marketwatch Web site. Go to cbs.marketwatch.com/news/newsletters/ and look for the "directory.")

What style of newsletter best fits your needs? Some newsletters provide little more than technical charts showing why to move into or out of key sectors. Others provide detailed commentary on a wide range of fund issues and offer ratings not only for recommended funds, but also for hundreds of others that the publisher keeps in its database.

There are newsletters that use e-mails or call-in hot lines to make daily or weekly updates, and there are newsletters that simply arrive in the mail once every month.

Those differences also show up in investment strategies. The No-Load Fund*X newsletter, for example, uses a momentum strategy of buying hot funds and dumping them when they cool off. The result is a high-maintenance, high-turnover portfolio. By comparison, Sheldon Jacobs' No-Load Fund Investor newsletter offers three suggested low-turnover portfolios, updated monthly.

How many portfolios does the newsletter offer? There is no "right" number, but make sure the offerings meet your needs.

That might mean portfolios for people at different age ranges and risk tolerances, so that your strategy evolves from one to the next over time.

It might be a one-size-fits-all strategy, particularly if it involves a market-timing model.

If you want a newsletter as a guide, rather than to follow its exact strategy, more portfolios will be better, so as to give you some idea of different asset allocation strategies to follow.

How have the newsletter's picks performed? Don't rely on the newsletter's interpretation of its performance, as some publishers have been known to tweak the numbers. Hulbert Financial Digest is the only newsletter that rates newsletters (for a sample copy, call 888-HULBERT). It has more than 160 in its database, which extends back more than 20 years.

If a newsletter is not tracked by Hulbert, be sure to at least gauge its results against the performance of other newsletters, rather than simply measuring it against the broader stock market. For newsletters with multiple portfolios, see how the strategy that most interests you has performed, relative to the newsletter's overall track record. Some newsletters have 20 or more portfolios, and though a few might look great, the overall average may be mediocre. Performance should indicate strategic ability, rather than try one of everything to find something that works.

Can you do what the newsletter suggests? You can duplicate a newsletter's results only if you can mimic its strategy.

Don't rush to invest right away. Paper-trade the portfolio - following strategy to the letter, but without money involved - for three to six months to see how the advice fits in with your life; you might even set up phantom portfolios for several newsletters to decide which is best for you.

Chuck Jaffe is mutual funds columnist at The Boston Globe. He can be reached by e-mail at jaffe@globe.com or at The Boston Globe, Box 2378, Boston, Mass. 02107-2378.

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