A Hulbert rating is an independent score that measures how well an investment newsletter’s recommendations would have performed over time. The ratings are produced by Hulbert Ratings, LLC (founded by market commentator Mark Hulbert), which simulates hypothetical portfolios that follow each newsletter’s buy and sell advice and then reports risk and risk‑adjusted return metrics designed to give subscribers an objective view of a newsletter’s real-world track record.
Key takeaways
– Hulbert Ratings track newsletters by maintaining hypothetical portfolios that follow each newsletter’s published advice, then report returns, volatility, and risk‑adjusted performance (chiefly via the Sharpe ratio).
– Ratings go back decades (tracking began with the Hulbert Financial Digest in 1980). Hulbert Ratings continues that work today.
– The service publishes scoreboards for trailing 12 months and longer-term windows (3, 5, 10, 15, 20, 30 years) and an “Honor Roll” for newsletters that have performed well in both up and down markets.
– Limitations: Hulbert must sometimes infer vague recommendations; newsletters pay to be tracked (flat fee); past performance is not a guarantee of future results.
Sources: Investopedia (Daniel Fishel) and Hulbert Ratings pages (About, Performance Scoreboards, Honor Roll).
How Hulbert Ratings work (methodology overview)
– Subscription and anonymity: Hulbert Ratings subscribes to newsletters anonymously (often under other names) to avoid receiving early or preferential tips and to replicate the real consumer experience.
– Hypothetical portfolios: For each tracked newsletter, Hulbert builds a model portfolio that implements the newsletter’s published buy and sell recommendations. When advice is vague, staff infer likely trade actions and document assumptions.
– Return and volatility measures: Monthly returns of each simulated portfolio are computed. The standard deviation of monthly returns becomes the newsletter’s “risk number” (a measure of volatility).
– Risk‑adjusted performance: The Sharpe ratio—a measure of excess return per unit of volatility—is used to provide a risk‑adjusted performance score. Hulbert publishes raw returns and risk‑adjusted metrics across multiple trailing windows.
– Public scoreboards and audits: Results are published on Hulbert’s site for the most recent 12 months and for multi-year lookbacks; newsletters pay a flat fee to be tracked and audited.
What the Newsletter Honor Roll is
The Hulbert Investment Newsletter Honor Roll lists newsletters that produced above‑average returns in both up and down markets. It grades a newsletter’s performance separately for up‑market and down‑market periods (showing cumulative gains since a base date such as April 2000) to highlight consistency across different market regimes.
Special considerations and limitations
– Past performance is not a guarantee: Like any performance record, Hulbert’s historical returns do not promise future outcomes.
– Inferred recommendations: Some newsletters provide vague or non‑specific guidance; Hulbert must interpret these, which can introduce tracking error versus what a real subscriber might have done.
– Newsletter payment model: Newsletters pay a flat fee to be tracked; while this funds auditing, it could create selection effects (not every newsletter chooses to be tracked).
– Survivorship and selection bias: Although Hulbert’s database starts in 1980, not every newsletter persists; careful readers should observe both long‑term history and whether shorter‑term results are driven by a few lucky years.
– Fees and execution: Real subscribers face subscription costs, slippage, broker fees, and taxes—factors that can materially change net returns compared with hypothetical portfolios.
– Statistical noise over short windows: Short trailing periods can be volatile; focus on multi‑year (3–10+ year) performance for a more reliable picture.
Are investment newsletters worth it?
– Empirical summary: Hulbert’s decades of analysis show that, like most active managers, most newsletters underperform broad market indices over long periods. Mark Hulbert himself has repeatedly noted that the simple strategy of buying a low‑cost index fund and holding it is difficult to beat in aggregate.
– Behavioral value: Hulbert argues newsletters can have behavioral value—helping some investors stick to a consistent plan instead of panicking and selling during downturns—so newsletters can be useful as an “accountability device” for investors who would otherwise trade emotionally.
– Practical conclusion: For many investors, a core allocation to low‑cost index funds makes sense; newsletters can be used selectively for ideas, education, or behavioral discipline, but shouldn’t replace prudent portfolio construction and risk management.
Practical steps — How investors should use Hulbert Ratings
1) Clarify objectives and constraints
• Decide your time horizon, risk tolerance, tax situation, and whether you seek income, growth, or speculatory ideas. This determines how any newsletter recommendations would fit into your plan.
2) Consult the Hulbert scoreboards (multi‑window view)
• Look at trailing 3, 5, 10, 15+ year returns, not just 12‑month performance. Check both raw returns and the Sharpe/risk‑adjusted scores.
3) Evaluate volatility and drawdown characteristics
• Check the newsletter’s risk number (standard deviation of monthly returns) and historical drawdowns so you know what swings to expect.
4) Check up‑market vs down‑market performance (Honor Roll insight)
• See whether the newsletter has historically outperformed in both rising and falling markets—consistency across regimes matters.
5) Read the methodology notes for any tracked newsletter
• Understand how Hulbert treated vague advice, how frequently trades were assumed, and whether dividends, taxes, or fees were included.
6) Assess net cost and execution realism
• Subtract subscription fees, account for commissions/slippage, and consider tax impacts—Hulbert’s simulations are helpful but may not reflect every investor’s net returns.
7) Trial first; size positions conservatively
• Paper‑trade the strategy or allocate a small portion of your portfolio to implement a newsletter’s recommendations before committing significant capital.
8) Use newsletters as idea generators or behavioral aids, not absolute rules
• Combine selective newsletter ideas with a low‑cost core (index funds) and pre‑set rules for position sizing and stop losses.
9) Re‑evaluate periodically and avoid chasing hot prior performance
• Don’t chase the top performers from the most recent year; prioritize long‑term consistency.
Practical steps — For newsletter publishers who want transparent track records
1) Publish clear, time‑stamped, specific trade recommendations and model portfolios.
2) Allow independent auditors (or Hulbert) to subscribe anonymously to validate performance.
3) Report gross and net returns, including assumed fees and typical execution costs.
4) Provide complete disclosure about methodology, sample size, and any backtested vs live performance.
5) Avoid selective data: disclose periods of poor performance, drawdowns, and failed calls.
Interpreting the key metrics (quick guide)
– Raw return: total return of the simulated portfolio over the period. Higher is better, but look at volatility.
– Risk number (std. dev. of monthly returns): higher values = more volatile strategy.
– Sharpe ratio: (average excess return) / (standard deviation). A higher Sharpe means better risk‑adjusted performance. Use it to compare newsletters with different volatility profiles.
– Honor Roll status: indicates above‑average performance in both up and down markets—useful for consistency screening.
Bottom line
Hulbert Ratings provide one of the most systematic, long‑standing independent measurements of investment newsletter performance. They are a valuable tool for evaluating newsletter credibility, consistency, and risk‑adjusted returns, but they are not a substitute for your own financial plan. Use Hulbert’s multi‑period scoreboards and Honor Roll as part of a broader due‑diligence framework: focus on long horizons, account for costs and taxes, and incorporate newsletter ideas cautiously alongside a core of diversified, low‑cost investments.
Sources and further reading
– Investopedia, “What Is a Hulbert Rating?” (Daniel Fishel).
– Hulbert Ratings — About; Performance Scoreboards; Investment Newsletter Performance; The Hulbert 2020–2021 Investment Newsletter Honor Roll. (Hulbert Ratings, LLC)
Continuing from the overview above, this section expands on how to interpret Hulbert Ratings, how to apply them in practice, detailed examples of the math behind the ratings, limitations to watch for, and practical steps investors can take when considering investment newsletters.
How to Interpret Hulbert Ratings — practical guidance
– Look at long-term performance first. Hulbert Ratings publishes returns and risk-adjusted metrics over multiple trailing horizons (1, 3, 5, 10, 15, 20, 30 years). Short-term outperformance can be noise; consistent performance over long horizons is more meaningful.
– Compare absolute and risk-adjusted performance. A high raw return with high volatility may be less attractive than a modest return delivered with low volatility. Hulbert’s Sharpe-ratio–based measure adjusts returns for risk and is central to their ranking.
– Check performance in up and down markets. The Hulbert Honor Roll grades newsletters on performance in both bull and bear periods. A newsletter that only shines in bull markets but collapses in downturns may not suit risk-averse investors.
– Consider the risk number (standard deviation). Hulbert assigns a risk number reflecting the volatility of monthly returns. Use that to judge whether a newsletter’s approach fits your temperament and portfolio allocation limits.
– Confirm methodology transparency. Read Hulbert’s methodology page to understand how they infer trades, how they handle ambiguous signals, how they simulate portfolios, and any adjustments for dividends, fees, or slippage.
How a Hulbert Rating Is Constructed — step-by-step (simplified)
1. Subscribe independently: Hulbert Ratings subscribes to newsletters under an independent name so tips aren’t delivered early.
2. Translate advice into trades: For each issue, analysts interpret buy/sell signals in concrete portfolio actions (e.g., buy 100 shares of XYZ, sell position in ABC), inferring instructions when advice is vague.
3. Run a hypothetical portfolio: Trades are executed in a simulated portfolio that records prices, dividends, and assumed transaction costs.
4. Compute monthly returns: The simulated portfolio’s monthly returns are calculated.
5. Compute volatility: The standard deviation of monthly returns is computed to represent risk.
6. Compute risk-adjusted performance: The Sharpe ratio is used to convert raw return minus a risk-free rate into a risk-adjusted performance measure: Sharpe = (Rp − Rf) / σ.
7. Rank and report: Newsletters are then ranked on various horizons and displayed on scoreboards and the Honor Roll when qualifying.
Example: Calculating a simple Sharpe ratio (illustrative)
Suppose a newsletter’s simulated portfolio had these simplified outcomes over a 12-month period:
– Average annual return (Rp): 12%
– Annualized standard deviation (σ): 10%
– Annual risk-free rate (Rf): 2%
Sharpe ratio = (Rp − Rf) / σ = (0.12 − 0.02) / 0.10 = 0.10 / 0.10 = 1.0
Interpretation:
– Sharpe ≈ 1.0 is generally considered good (risk-adjusted returns roughly one unit of return per unit of volatility).
– Sharpe > 1 is strong; > 2 is excellent; < 1 is modest; < 0 indicates underperformance versus the risk-free rate.
Example: From newsletter text to simulated trade (illustrative)
Newsletter headline: "We recommend accumulating WidgetCo while shares remain below $50; buy on dips to $45."
How Hulbert would handle it:
– Assume a position size (e.g., initial buy equal to 5% of portfolio) on the first issue after publication if price < $50.
– If next issue says “add more on a dip to $45,” simulate an incremental buy at the first close ≤ $45.
– If wording is vaguer (“consider WidgetCo”), Hulbert may infer a smaller or discretionary position or mark it as insufficiently precise — and record the interpretation in its methodology.
Practical steps for investors using Hulbert Ratings
1. Start with the headline: See a newsletter’s long-term and trailing-3/5/10-year Hulbert ratings and risk number.
2. Compare to appropriate benchmarks: If the newsletter focuses on U.S. large-cap stocks, compare its simulated results to a broad U.S. equity index (e.g., S&P 500) on both absolute and risk-adjusted bases.
3. Read the methodology: Understand how Hulbert modeled trades and handled ambiguous recommendations for the newsletter in question.
4. Examine drawdowns and down-market performance: Don’t judge solely by average return—check max drawdowns and returns during recessions or bear markets.
5. Consider your portfolio role and size: If a newsletter has high volatility, limit position sizing or allocate only a portion of your portfolio to its strategy.
6. Account for fees, taxes, and slippage: Simulated returns may not include investor-specific taxes or execution issues; estimate after-tax returns based on your status and add realistic transaction costs.
7. Look for consistency, not hype: Favor newsletters with consistent methodology and transparent reasoning rather than ones that change approach frequently.
8. Use newsletters for discipline or ideas, not as a sole strategy: Consider using recommendations to nudge you toward a preplanned allocation or to generate idea lists for further research.
9. Monitor and re-evaluate: Re-check Hulbert’s updates periodically—performance can change materially over time.
Special considerations and limitations
– Ambiguity in advice: Many newsletters issue qualitative or discretionary guidance. Hulbert must infer trades, introducing judgment and potential measurement error.
– Survivorship bias: While Hulbert attempts to track newsletters continuously (including those that close), other trackers might only report surviving newsletters, which can overstate performance.
– Fees to be tracked: Newsletters pay a flat fee to be tracked and audited by Hulbert. This business model can raise conflict-of-interest concerns; however, Hulbert maintains that the subscription model allows for impartial audits because newsletters do not influence the tracking results.
– Market conditions and strategy fit: A newsletter that excels in a particular environment (e.g., rising interest rates, sector rallies) may struggle when conditions change.
– Transaction costs and personal constraints: High-turnover strategies will be costlier in taxable accounts or for small investors due to commissions, bid-ask spreads, and taxes—real-life returns for individual subscribers can differ substantially from simulated performance.
– Behavioral considerations: Mark Hulbert’s defense of newsletters is psychological—some investors follow advice consistently, which can be better than intermittently following an optimal-sounding plan. But this is an argument about human behavior rather than evidence that newsletters generally outperform.
Newsletter Honor Roll: what it signals
– The Hulbert Investment Newsletter Honor Roll highlights newsletters that have produced above-average results in both up and down market phases. Inclusion signals a combination of decent absolute returns and robustness through varying market regimes.
– Honor Roll readers should still examine the underlying metrics: long-run Sharpe ratios, risk numbers, drawdowns, and the newsletter’s stated strategy, since the roll is a starting filter, not an endorsement of suitability.
Are investment newsletters worth it? Pros and cons
Pros
– Discipline and behavioral help: Newsletters can provide a rule set that helps investors act rather than panic.
– Idea generation: They can surface names, sectors, or strategies you might not otherwise consider.
– Education: Some newsletters include detailed research and reasoning that can improve an investor’s knowledge.
Cons
– Most underperform the market: Decades of Hulbert data show many newsletters, like many actively managed strategies, underperform broad indexes on a risk-adjusted basis.
– Costs and implementation gap: Transaction costs, taxes, and real-world execution issues can materially reduce investor returns versus simulated performance.
– Varying transparency: Not all newsletters are explicit about position sizing, risk controls, or when they changed their process.
Checklist to evaluate a newsletter using Hulbert Ratings
– Is the newsletter tracked by Hulbert Ratings? If yes, check the scoreboards and methodology notes.
– What is the newsletter’s Hulbert risk number and Sharpe-style metric over multiple horizons?
– How did the newsletter perform in up markets versus down markets?
– Does the newsletter’s strategy match your investing horizon, tax situation, and position-size capabilities?
– Are the newsletter’s past returns concentrated in a short time window or consistent over longer periods?
– Does the newsletter disclose its investment process and historical track record to subscribers?
– What are the subscription fees, and how often are trades recommended (turnover)?
Example case study: Two hypothetical newsletters (illustrative)
Newsletter A
– Focus: Small-cap value stocks
– 10-yr annualized return (simulated): 14%
– Annualized volatility: 20%
– Sharpe-style: (14% − 2%) / 20% = 0.60
– Notes: Strong returns but high volatility; good for aggressive satellite allocation.
Newsletter B
– Focus: Dividend-growth large-cap stocks
– 10-yr annualized return: 10%
– Annualized volatility: 12%
– Sharpe-style: (10% − 2%) / 12% = 0.67
– Notes: Lower returns but better risk-adjusted performance and smaller drawdowns; may suit core equity allocation.
Decision framework:
– If your tolerance for volatility is low and you want steady income, Newsletter B is more appropriate.
– If you have a small allocation for higher beta exposure and can tolerate drawdowns, Newsletter A could fit as a satellite.
How to test a newsletter yourself (practical steps)
1. Paper trade for a trial period: Implement recommendations in a paper portfolio or small real-money trial to measure your ability to follow recommendations and to observe slippage and execution timing.
2. Track realized returns monthly: Record prices, dividends, and commissions to compute actual monthly returns.
3. Compare to benchmark: Compute excess returns over an appropriate index and compute the standard deviation of those monthly excess returns.
4. Compute Sharpe ratio: Use your realized returns and your personal or current risk-free rate to compute a personalized Sharpe ratio.
5. Reassess: If realized returns are materially lower than Hulbert’s simulated numbers, identify why—taxes, delayed executions, partial fills, or different interpretations of advice.
Regulatory and ethical notes
– Newsletters are typically not fiduciaries. They provide information, not personalized advice tailored to your full financial situation.
– Be cautious of newsletters that promise unrealistic guarantees or emphasize past performance without disclosing methodology or risk.
– Always treat newsletter recommendations as one input among many; don’t substitute a newsletter’s buy/sell signals for a comprehensive financial plan.
Additional resources and where to verify information
– Hulbert Ratings website (methodology and performance scoreboards) — useful for primary metrics and detailed explanations of how trades are inferred and simulated.
– Investopedia’s Hulbert Rating definition and overview (good background summary).
– Academic literature on active management and the persistence of performance for broader context on why many active strategies underperform.
Concluding summary
Hulbert Ratings offers a structured, independent way to evaluate investment newsletters by simulating hypothetical portfolios based on published advice, measuring monthly returns, estimating volatility, and producing risk-adjusted metrics such as a Sharpe-ratio equivalent. For investors, Hulbert’s scoreboards and the Honor Roll are valuable filters that reveal long-term consistency, risk characteristics, and relative resilience in up and down markets.
However, Hulbert’s simulations are not a substitute for personal due diligence. Ambiguous advice, execution realities, taxes, fees, and an investor’s behavioral tendencies all influence actual outcomes. Use Hulbert Ratings to identify candidates worth further investigation; then run your own small-scale tests, compare to benchmarks, and ensure any newsletter’s approach fits your goals and risk tolerance.
If you choose to subscribe to a newsletter, treat it as part of an overall plan: limit position sizes, assess tax and cost impacts, and avoid letting frequent trade signals overwhelm your long-term strategy. Ultimately, the evidence over decades suggests that few active approaches consistently beat simple, broad-based index strategies on a risk-adjusted basis—but for some investors, newsletters offer the discipline, focus, and psychological structure needed to stay invested.
Sources
– Investopedia, “What Is a Hulbert Rating?” (Daniel Fishel). Accessed Aug. 18, 2021.
– Hulbert Ratings LLC — About, Performance Scoreboards, Investment Newsletter Performance, Hulbert Investment Newsletter Honor Roll. Accessed Aug. 18, 2021.