Hulbert's Observations from Tracking Investment Newsletters

A recent article in the AAII Journal outlined an interview with Mark Hulbert (of Hulbert Financial Digest) in which the MarketWatch senior columnist shared lessons learned during his years of tracking investment newsletters.

Here are some highlights:

  • One of the biggest lessons learned, Hulbert said, was that the “prospect of making money is so alluring that investors are willing to suspend all their rational faculties.”
  • With regard to tracking the performance of model portfolios, Hulbert said that “the depressing thing was to discover how little persistence there was between the past and the future.” Even among top performers, he said, only a small percentage have been able to beat the market in the subsequent period.
  • When asked at what point an investor should throw in the towel when their strategy is suffering periods of underperformance, Hulbert said that if investors want to be data-driven, they have two choices: “One is to go with an index fund, because the hurdle over which they have to jump before they make any decisions on an active manager is so high that they can’t jump over it. Alternatively, they would have to be willing to stick with a strategy, even one that’s losing, for probably more years than they have the patience to do so.”
  • On average, Hulbert argued, “luck dominates the short- or even the intermediate-term” with respect to stock market returns, and human emotions “are an overlay on top of that, which makes it even worse.” He said, “it’s really a combination of randomness of luck on the one hand and our emotions, our self-destructive emotions, on the other. And boy, you put those two together, and it’s a miracle anyone ever beats the market over the long term.”
  • On how his market perspective has changed over the years, Hulbert asserted, “I’d say I’ve gotten a greater appreciation for how much uncertainty and risk there is in everything we do.” He added, “The last four decades have humbled me over and over again. There’s so much uncertainty out there that we don’t even know.”