Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, May 28, 1990 TAG: 9005260032
SECTION: BUSINESS PAGE: A7 EDITION: HOLIDAY
SOURCE: CAROLE GOULD THE NEW YORK TIMES
DATELINE: LENGTH: Long
Last year, his market signals guided 7,500 subscribers to buy and sell funds and helped them beat the Standard & Poor Corp.'s 500-stock index with a 32.7 percent gain.
They also won him top ranking among investment newsletters that survey mutual funds, said Mark Hulbert, who tracks newsletter performance from Alexandria, Va.
The turbulence in today's markets has led more and more fund investors to rely on newsletter editors like Sullivan.
Mutual funds were created, of course, so investors could use professional money managers to pick stocks.
But the proliferation of funds in the 1980s led to so much choice - and confusion - that newsletters cropped up to help investors pick the portfolio managers who pick the stocks in mutual funds.
Now, about 35 newsletters specialize in mutual funds.
Some follow the whole gamut of funds, others focus just on Fidelity funds or closed-end funds.
The newsletters help investors construct a portfolio of funds - which to buy, when to invest, when to move cash into money funds - or simply say when to move in or out of stocks or bonds.
Some focus only on funds; others pick stocks, too. Subscriptions cost about $100 to $125 a year.
How do you choose a newsletter? Start by checking strategies.
Newsletters take out advertisements in the financial pages of newspapers and magazines to outline their operating philosophy.
The Hulbert Guide to Financial Newsletters provides profiles of the newsletters and their editors' philosophies.
But basically you need to assess three elements - time, risk and performance - when you pick a newsletter.
How much time do you want to spend on your portfolio?
Many newsletters have hotlines that subscribers can call to keep abreast of market shifts between issues.
That indicates a newsletter's strategy depends on constant change - avoid these unless you plan to invest aggressively.
Next evaluate the amount of investment risk the newsletters assume and match that to your own.
A newsletter should also be able to convince you that it can beat the market.
What kind of system is used to make the recommendations?
How does the newsletter perform relative to the market?
Track newsletter performance for at least three or four years by checking Hulbert's publication or by taking the more complicated route of checking newsletter recommendations against market performance.
For the many newsletters that are relatively new and do not have a track record, focus on risk instead.
That way you can see whether a great short-term performance is the result of good advice - or a lucky bet.
Before committing yourself, take out a trial subscription - many are available for $20 or $25.
Look for thoroughness and clarity: Are all the elements of building a portfolio covered?
Is there a follow-up on the recommendations in later issues, even if the funds were poor performers?
When you decide to adopt a newsletter's strategy, follow the advice.
That may seem self-evident, but experts say the biggest mistake investors make is to deviate from the prescribed course.
Hulbert suggests that investors who want to test a newsletter's strategy should track the investments on paper first or test them when the market is strong and you are making money.
"You have less of your ego invested then," he said.
Newsletters can be particularly useful for investors who rely on stockbrokers for investment ideas.
A broker's incentive to earn commissions may sometimes conflict with his role as your portfolio's watchdog.
For example, when mutual-fund groups launch a new product they often pay brokers extra to push the fund.
A warning, however: A newsletter editor's incentives may not always be sterling.
Some think they must continually recommend new investments, even when market conditions don't warrant a shift, in order to reassure subscribers that they are getting their money's worth.
Sales charges and taxes can make a big dent in investment returns.
All that said, what are the editors of the hottest newsletters recommending these days?
Sullivan of The Chartist Mutual Fund Timer has been out of the market lately.
He said he was watching the upward momentum of the Dow, but waiting for the secondary market to catch up, which he expects to happen in early June.
Burt Berry, who edits the second-ranking No-Load Fund X, based in San Francisco, has slightly speculative investors in the T. Rowe Price Science and Technology Fund, SteinRoe's Stock Fund and the Janus 20 Fund.
Eric M. Kobren, who edits the Wellesley, Mass.-based Fidelity Insight, has 35 percent of investors' cash in money funds and divides the rest among Fidelity's Growth Co. and Low-Priced Stock funds.
Jack Bowers, who edits the Fidelity Monitor in Rocklin, Calif., has investors in three Fidelity funds: Blue Chip, Growth Co. and Growth-and-Income.
In Woodland Hills, Ca., David Menasche, editor of Fundline, has investors one-third in cash, one-third in the Harbour and Ivy International Funds and the balance in the Janus 20 and T. Rowe Price's Science and Technology Fund.
by CNB