Key Takeaways
- Tracks investment newsletter risk-adjusted performance.
- Uses Sharpe Ratio for rating accuracy.
- Ranks newsletters over multiple long-term periods.
- Includes Honor Roll for top consistent performers.
What is Hulbert Rating?
The Hulbert Rating is a performance score assigned to investment newsletters, designed to help investors evaluate their effectiveness based on risk-adjusted long-term returns. Created by Mark Hulbert, it tracks newsletters' recommendations by simulating hypothetical portfolios to provide an objective view of their historical accuracy and insight.
This rating emphasizes the importance of assessing newsletters beyond simple returns, focusing instead on risk-adjusted metrics to offer a clearer picture of performance over time.
Key Characteristics
The Hulbert Rating incorporates several critical features to ensure reliable and actionable insights:
- Risk-Adjusted Performance: Uses the Sharpe Ratio to measure returns relative to volatility, emphasizing idiosyncratic risk control.
- Long-Term Tracking: Evaluates newsletters over multiple periods including 3, 5, 10, 15, 20, and 30 years to capture consistent performance.
- Independence: Ratings are based on independent data, not relying on newsletters' self-reported results.
- Honor Roll: Highlights newsletters with outstanding performance in both rising and falling markets.
- Subscription Model: Newsletters pay a flat fee to be included and audited, ensuring objective analysis.
How It Works
The Hulbert Rating system simulates investment portfolios that strictly follow the buy and sell advice given by each newsletter. It then calculates performance metrics, focusing on risk-adjusted returns instead of raw gains to better reflect real-world investor experience.
By emphasizing the Sharpe Ratio, the rating balances returns against the volatility of monthly returns, making it more useful for investors concerned about fluctuations. This approach helps you compare newsletters on an equal footing, whether their focus is on steady growth or more aggressive gains.
Examples and Use Cases
Investors use the Hulbert Rating to identify newsletters that provide reliable advice under varying market conditions:
- Equity Tracking: Following newsletters that recommend broad market exposure similar to funds like SPY or IVV can help align portfolio strategies with proven long-term performance metrics.
- Market Downturns: Newsletters on the Hulbert Investment Newsletter Honor Roll have demonstrated resilience, outperforming benchmarks during down markets.
- Strategy Selection: Use the rating to distinguish between newsletters focusing on short-term trading versus those emphasizing absolute return approaches (absolute return).
Important Considerations
While the Hulbert Rating offers valuable insights, you should consider that past performance—even when risk-adjusted—is not a guarantee of future results. The methodology excludes newsletters that do not pay the audit fee, which may limit the universe of evaluated sources.
Additionally, understanding concepts like the J-curve effect and how newsletters handle earnings season can further refine your interpretation of the ratings. Always complement Hulbert Ratings with your own due diligence before making investment decisions.
Final Words
Hulbert Ratings provide a reliable, risk-adjusted way to evaluate investment newsletters over various time horizons. To make the most informed choice, compare ratings across newsletters that align with your investment goals before subscribing.
Frequently Asked Questions
Hulbert Rating is a score assigned by Hulbert Ratings, LLC that tracks the long-term, risk-adjusted performance of investment newsletters to help investors evaluate their effectiveness.
Mark Hulbert created the Hulbert Rating in 1980 to provide an objective way to analyze and rank the performance of investment newsletters over time.
The rating uses hypothetical portfolios that mimic each newsletter's buy and sell advice and evaluates their risk-adjusted returns using metrics like the Sharpe Ratio to account for both returns and volatility.
Risk adjustment is important because it measures how much volatility or risk was involved in achieving the returns, ensuring newsletters are judged by both their performance and the stability of their recommendations.
Hulbert Ratings covers a wide variety of investment newsletters, including those focused on stock recommendations, options trading, precious metals, cryptocurrency, and other market strategies.
The Honor Roll lists newsletters that have consistently delivered above-average, risk-adjusted returns in both rising and falling markets over nearly two decades, highlighting top performers.
Hulbert Ratings are updated regularly, with performance tracked over recent periods like the past 12 months as well as longer trailing periods such as 3, 5, 10, 15, 20, and 30 years.
Hulbert Ratings and the Hulbert Financial Digest are published monthly on MarketWatch, providing detailed rankings and insights into the accuracy and risk-adjusted performance of investment newsletters.
