The fellow who tracks how newsletters perform is out with an annual review

The Hulbert Financial Digest Annual Review of Investment Newsletters, by Mark Hulbert and Joel Bludman Wittenberg. Reston, Va.: Reston Publishing Company. $14.95. 342 pp. If you're considering subscribing to an investment newsletter, now you have a comprehensive buyer's guide.

Before you drop $150 or so for a year's worth of just any sage's pearls, you may want to peruse The Hulbert Financial Digest Annual Review of Investment Newsletters. This tip-sheet compendium is a much-expanded version of the newsletter performance ratings Mr. Hulbert publishes monthly.

Like Hulbert's newsletter, the book includes most of the ``no more than two dozen'' newsletters that can honestly claim 5,000 or more subscribers -- plus 20 others that readers have requested.

The book aptly begins by addressing the raison d'^etre of a newsletter. After all, who needs another voice in the crowd? There are countless magazines, television shows, and columnists (not to mention stockbrokers) proffering ideas on the ``best way'' to invest your money.

These sources are fine for tips and factual information, the authors say. But ``as a rule these do not provide a specific model portfolio for you to follow or consistent follow-up on the securities they mention.''

As for stockbrokers, well, Hulbert and Wittenberg aren't too keen on them, either: ``You should realize that their incentives to make money for you sometimes can conflict with their desire to make money for themselves,'' they write.

Since investment newsletters charge directly for their advice, they are more accountable for their performance, the authors contend. Renewal rates are quite sensitive to the profitability of an investment strategy. It's easier to cancel a subscription than to switch brokers.

For all their bullishness on advisory letters, the authors are well aware that quality varies widely. For instance, advertising claims can be outrageous, ``buy'' signals are often more frequent than ``sells,'' and the favorite haven for these profit prophets is ambiguous advice.

Indeed, investment newsletters have a reputation of being more wishy-washy than Charlie Brown.

In a telephone interview, Mr. Hulbert said frankly, ``There's no guarantee these are the most profitable newsletters. I get requests for other newsletters, but they're not clear enough to be included.'' He cited the often-requested Merrill Lynch Market Letter as lacking a model portfolio.

Lucidity is the first point of comparison in the book. Tip sheets are rated according to clarity. To earn an ``A,'' a newsletter must provide a model portfolio and show, step by step, how an investor would translate all advice into that portfolio. Less than half of the 45 newsletters reviewed met this standard.

In the chapter on where a newsletter fits into your financial planning, 70 newsletters are rated according to risk and performance from 1980 to March 1983. The Dines Letters (List No. 6 and List No. 4) consistently ranked among the riskiest and turned in the best performances.

Other chapters cover selecting a newsletter based on tax considerations, timing the market, and the use of telephone hot lines. The bulk of the book provides an alphabetical summary of the newsletters, including subscription price, a sample copy, a performance discussion, the goals, and background of the letter and editor(s).

In the four years Hulbert has issued performance ratings, he has been criticized from time to time for his methodology. For instance, he presumes a 1 percent commission fee (an average discount broker ee) in his calculations, instead of a 2 or 3 percent fee (an average full-service broker fee). This penalizes longer-term investment strategy letters more than short-term trading scenarios.

``If you're paying for a newsletter advisory service for advice, why would you want to pay a full-service broker for brokerage research that isn't used?'' Mr. Hulbert responds.

One drawback to the book is that the latest information is nine months old. The most recent statistical comparisons are dated March 31, 1984. So some of the latest stars may be missing.

For instance, the third best performance in 1984 was turned in by B.I. Research (see chart), but this newsletter wasn't reviewed in the book. Since the Annual Review selection was chosen, Hulbert has added 15 more newsletters to his monthly publication.

Because this is the first ``annual'' review, one would hope that in future editions (publisher willing, says Hulbert) the lead time could be cut and more letters evaluated.

David Clark Scott is a Monitor staff writer. Chart: Hulbert's latest monthly ranking of newsletters

Top portfolios of 1984 Gain for the year The Option Advisor 95% (options) Systems and Forecasts 22.2% (options, stocks, mutual funds, convertible bonds) B.I. Research 14.3% (stocks) International Harry Schultz Letter 13.9% (US stocks, gold, silver) The Granville Market Letter 10.1% (stocks, gold futures, stock index futures) Top 4-year performers (6/30/80 to 3/31/84) 1. Dines Letter List No. 6 (trading portfolio) 2. International Harry Schultz Letter (US stocks, precious metals portfolio) 3. Dines Letter List No. 2 (speculative portfolio) 4. Green's Commodity Market Comments (portfolio for traders) 5. Professional Investor (Amex Scan) Source: Hulbert Financial Digest (monthly newsletter), and Hulbert Financial Digest Annual Review of Investment Newsletters

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