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I get emails every week from The Oxford Club. They claim The Hulbert Financial Digest rates them one of the best newsletters. How do their recommendations stack up to your Vanguard recommendations?

The Hulbert Financial Digest tracks the performance of more than 180 newsletters and over 500 portfolios recommended by the newsletters. Most of the newsletters offer advice on mutual fund selection but there are many that recommend individual stocks. Some of the newsletters recommend the use of leverage and other aggressive strategies.

Hulbert's service has been a beacon of light on an otherwise shady industry. Few of the newsletters are written by firms registered with the Securities and Exchange Commission, so they are free to say almost anything they want to entice you to subscribe to their services.

Hulbert does a lot more than just record returns. The service computes the riskiness and risk-adjusted return of each portfolio. They also give each portfolio a clarity rating based on the clarity and completeness of the advice. An "A" means the newsletter clearly spells out the portfolio recommendations including asset allocation and the percentage that should be invested in each security. A "B" rating means the newsletter provides asset allocation advice and a list of recommended securities but does not construct a model portfolio. A "C" rating means the newsletter only provides a list of recommended securities. If an investor just wants a list of ideas to choose from a "C" rated newsletter may work. For investors who are looking for specific advice on what to buy, when to buy it and when to sell it, an "A" rated service is probably more useful.

Hulbert tracked 6 Oxford portfolios in 2006. Their returns ranged from 17.8% for their Anti-Terror Portfolio to 30.7% for their Perpetual Money Portfolio. The average of all 6 portfolios was 23.6%. The average risk was 107, a little above average. Their clarity rating is a "C".

According to Hulbert our Vanguard Equity Portfolio was up 22.7%. The risk score was 91, a little less than average. The clarity score was an "A" since our letter tells you exactly what funds and in what percentages.

There are many ways to compare different investment strategies. The Oxford Club appears to be committed to finding a few companies that have great potential for gain. Hulbert tracks the number of companies or funds each portfolio contained. On average The Oxford Club has less than 20 companies in each of their portfolios. Our Vanguard Equity Portfolio had 7 mutual funds representing over 5000 different companies.

I have read many of The Oxford Club's Internet advertisements. They always have a stock or strategy that is about to make people unbelievable returns. And you have to get into it NOW if you want to make the big return. In their latest ad I have to move to action by March 30 to double my income and receive my first 8 checks in May. According to the ad this "may be" the only investment I need for the rest of my life.

Do we want to find a silver bullet? Of course. Do we want to believe there are Wall Street insiders who know how to make more than those of us who don't have access to this special information? Of course. Do we want to believe they have somehow determined we should be let into this special group? Of course. Do we want to believe these people can make us more than the market, more than Warren Buffet, more than our wildest dreams? Of course. Is all of this likely? No. But it won't keep us from harboring the dream.

The fact is The Oxford Club's recommended stocks may do better than our Vanguard Portfolio. Theoretically they should do better as they are taking more risk. The questions I have for you are: Are they likely to do better over the long run? Will you buy every one of their recommendations or will you try to pick the ones that sound the most exciting? How will you know when to sell? Is their recent performance because they have some special inside information or just the result of a bull market? How are their selections likely to perform in a declining market? If your investments are in the taxable portion of your portfolio, which will give the best after-tax return? Which is better for a small part of your portfolio and which is better for the majority, or all, of your equity investments?

IMPORTANT DISCLOSURE: The specific content of this message is intended strictly for informational and educational purposes. Such content is not based on knowledge of any reader's individual needs or circumstances and should not be construed as investment or tax advice. Any investment or tax decisions made are ultimately the responsibility of the individual.

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