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Be Wary Of Predictive Mutual-Fund Ratings : David Snowball Comments

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  • Thanks, Ted.

    The write appears to be similar to; with some specifics; the forthcoming MFO, Mutual Funds Ratings Sites commentary.

    Regards,
    Catch
  • And while at it also be wary of fund ratings based on past performance!

    There is no perfect way of knowing what is up in the future. Index fund investors at least does not need to judge continuation of manager skill.
  • Reply to @Investor: In the world of investment, the only sure thing is the management fee (or expense ratio).
  • I'll be curious to hear your take on Fund Reveal, one of the three sites we reviewed as being worthwhile. At base, the site is run by two guys who worked deep inside Fidelity. They didn't do money management, but what I think of as operations management: they tried to find out how to reduce errors in Fido's decision-making and decision-executing mechanisms. One thing their studies led to was a focus on day-to-day (rather than monthly, quarterly or annual) fund volatility. Their site (subscription with a free trial) recalculates returns based on daily volatility, which they think generates a decent predictive model.

    David
  • edited February 2012
    Howdy David,

    I peeked at Fund Reveal several days ago; and am curious as to the forthcoming MFO write regarding this site. Obviously, over the years and with the expansion of the internet; one may find 1,000's of investment wisdom sites that express "their" system is the best to maximize one's investment gains.
    I remain open to finding a site with positive trackable results; knowing many sites use their own modeling criteria and perhaps a touch of the human element thrown into the mix.

    Regards,
    Catch
  • Guys:
    I would hope you can also take a look at New Constructs predictive ratings.
    Our predictions are based on our stock ratings of the fund's holdings - and - our stock ratings are recognized by Barron's as among the best in the business.

    No one (that I know of) has perfect prediction capability, but given the success of our stock ratings, I will bet that my predictive fund ratings are by far the best in the business.

    Plus, my methodology is 100% transparent - on the fund level and stock level. http://blog.newconstructs.com/2011/11/23/predictive-fund-rating-methodology/
  • edited February 2012
    Howdy David T,

    The site and blog is on my "to do" list. And I think I am too busy some days.

    Questions: At the "Funds Screener" page, how frequently are the listings updated, as to rank and the star counts for any chosen category? I will presume there may be other features available for this list using a paid account, versus the free version I have just viewed?

    Thank you.

    Regards,
    Catch
  • Catch22,
    My apologies for delay in reply. It is not representative of my interest in your work.

    The ratings are updated daily based on new holdings and stock prices of all holdings.
    For premium features: http://www.newconstructs.com/nc/fundscreener/fund-screener-premium.htm

    Just wondering why you guys did not mention New Constructs as a provider of fund ratings alongside several other newcomers?
  • I visited New Constructs today to check it out, and entered a couple of dozen tickers in the free analysis screen. All U.S. large and mid-caps were rated 3 stars, and all small caps were rated 2 stars. (There were no ratings for any of the foreign funds I entered.) I didn't see any differentiation between funds other than the cap size. I hope I was missing something.
  • AndyJ:
    Thank you for your follow up.

    The only way funds will get the same rating is: they hold the same stocks and charge the same fees. The tickers you entered must have been for very similar funds. Otherwise, the ratings would be different.

    We do not cover enough foreign stocks to cover foreign funds.
  • Dtrainer, that was not the case at all. I tried a wide variety of funds, and their ratings were just as I stated in the previous post. Sorry, if you don't have a more plausible explanation, I don't care to spend any more time on the site, or have a long conversation with you about it.

  • AndyJ - I am disappointed that you have lost interest. If the funds you entered did not hold (mostly) the same stocks, then they held stocks with similar ratings.
    I doubt you will be surprised that the majority of funds get my Neutral rating. I mean, most funds are mediocre (Neutral). A few are great (Very Attractive), a few more good (Attractive). There are lots of bad ones (Dangerous) and there are a few horrible (Very Dangerous).

    Details are in this article - very interesting analysis on how investors have good research on funds with low fees, but they do a poor job of picking funds with good stocks b/c there is no research on the quality of holdings in funds.
    http://blog.newconstructs.com/2012/02/13/low-fees-dupe-investors/
  • I kind of like Fund Reveal. I ran my portfolio though it and found an outlier. I plan on selling some of it. I think it is worth looking at the 15 day free trial subscription.
    prinx
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