Barry Ritholtz reads Mark Hulbert, and saves
the rest of us a Barron’s subscription. Apparently Hulbert has learned four
big lessons over the past 27 years following investment newsletters. Number
two is the one which astonishes me:
Lesson #2: There is more than one road to riches
Hulbert looks at these intractable investment questions:
• Is fundamental analysis better than technical analysis?
• Is successful market timing possible?
• Is buy-and-hold better than in-and-out trading?
If someone asked me these "intractable investment questions", it
would take me about, oh, two seconds to answer "yes, no, and yes".
Hulbert, however, isn’t so sure:
After studying Newsletter writers for twenty-seven, he notes he is "no
closer to answering these questions" than when he started. However, he
did discover the following:
Over the last 27 years, the top performing newsletter advocates the long-term
buying and holding of good quality stocks. No surprise, considering that 20
of the 27 years were a bull market.
But consider that the second-place newsletter involves a combination of both
fundamental and technical analysis, as well as market timing. The average
holding period of its recommended stocks is less than six months. And in third
and fourth place are newsletters whose approaches are based exclusively on
I find this fascinating, and from it I draw one main conclusion: that fundamental
analysis is about as useful as technical analysis, i.e. not at all.
You can look at fundamentals and minimize your trading costs all you like, but
ultimately the market is smarter than you are, or else the market just doesn’t
respond to fundamentals in the way you think it should.
Or, in three words: buy the index.