Hulbert Financial Digest - Explained
What is the Hulbert Financial Digest?
Written by Jason Gordon
Updated at April 17th, 2022
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What is the Hulbert Financial Digest?
The Hulbert Financial Digest was a newsletter that tracked the market performance of other investment newsletters (assuming a hypothetical investor followed each one to the letter). Interestingly, the long-term findings of this newsletter was that few investors will beat the return on the market by active investing. Most investors are better off investing in an index fund and holding it long term. Hubert stopped publishing the newsletter in 2016.
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How Does the Hulbert Financial Digest Work?
Hubert rated over 125 separate newsletters on clarity of recommendation and risk-adjusted performance. He echoed the recommendation of other major investors (such as Warren Buffet) that active traders will not be able to beat the market in the long-run. He used the Wilshire 5000 index as a proxy for the market return. He did add that investors generally will not hold an index in a down market. Thus, the future potential returns are sacrificed by selling low and changing to alternative investment vehicles. So, many investors do better by following their financial newsletter recommendation (actively trading) because they will stick to it even though statistically this is a poor choice in comparison to holding an index fund. Hubert still publishes Hulbert Stock Newsletter Sentiment Index (HSNSI), which "reflects the average recommended stock market exposure among a subset of short-term market timers tracked". Imagine that you're publishing an investment newsletter. How do you attract attention and get people excited enough to subscribe? You certainly don't do that by recommending buying index funds and holding onto them.