Copyright 2012 Tom Madell, PhD, Publisher
Sept 2012. Updated Sept. 16, 2012


-Our Mutual Fund BUY Signals Again Prove Accurate

-Looming Policy Warfare: Ignore at Your Peril.
By Steve Shefler   (on separate page - to view, click here)


Our Mutual Fund BUY Signals Again Prove Accurate

By Tom Madell

This is a brief performance update on how readers who followed our BUY signals would have done over the last year.

A little over a year ago, in our Aug. 2011 Newsletter , we issued one of our relatively infrequent BUY signals covering all the major categories of mutual funds except Technology, Emerging Markets, Pacific (ex-Japan funds), and Precious Metals funds.

The signals were also sent as an emailed Alert to subscribers on July 20, 2011.

Although most stock indexes dropped considerably over the next few weeks, this created an even better buying opportunity since the signals are intended to reflect potential prospects over a minimum of at least one year ahead, and usually lasting for at least several years.

In our Sept. 2011 issue, based on new data, our signals were narrowed. They generated BUY for a more restricted group of funds: Large Blend, Real Estate, Mid-Cap Growth, and Small Blend. Large Growth was a borderline BUY. Most other categories, while no longer outright BUYs, were still regarded positively as HOLDs.

How have these signals done over a little more than 12 months? The following table shows the total returns of each of the nine major Morningstar fund categories, plus several others that many investors might have invested in.

Performance of Major Stock Mutual Fund Categories
Between Sept. 1, 2011 and Sept. 7, 2012

Fund Category

Percent Change

Large Growth


Large Blend


Large Value


Midcap Growth


Midcap Blend


Midcap Value


Small Growth


Small Blend


Small Value




Real Estate




Emerging Markets

 - 5

Pacific (ex-Japan)

 - 6

Precious Metals

 - 21

Note 1: Returns for the last 4 categories are approximate.
Note 2: Return for the S&P 500 was 20% over the same period.

The table generally shows that our empirically generated signals were highly correct. The two exceptions were with regard to International and Technology funds.

One important aspect of stock category performance over the last 5 years has been that fund averages, regardless of category, have tended to exhibit performance that has not been markedly different from one another. Thus, since the domestic stock market has had another positive performance over the last 12 mos., almost all US fund categories have been quite positive. (But 3 out of the 4 categories we excepted from our overall BUY signal last year did perform poorly, and more poorly than we expected.)

While our BUY signals may create skepticism among those who would prefer to make their investment decisions based on an analysis of economic, and even worldwide political/social developments, our methodology is primarily based on data that relies less on widely followed and publically available data, and more on our own detailed research into how stock funds have actually behaved over the last several decades.

The above findings are consistent with other data we have frequently shown on our site showing the effectiveness (thus far, at least) of our Alerts and BUY, SELL, and HOLD signals. (For example, you can review the May 2010 Newsletter ). While one must obviously recognize that no one can claim to be able to forecast future happenings before they occur, our signals have now shown a high degree of ability to provide the kind of forecasts that can be of real value to stock fund investors.

Our Oct. Newsletter which will contain our latest Model Portfolios will give you my current suggestions for fund categories and funds you may consider when making future choices.

Please note: Subscribers will not have received email notification for this briefer than normal Sept. Newsletter. We suggest you always check our site at the beginning of every month in the event you do not receive notification.


To sign up to receive notification of new Newsletter postings as well as infrequent, but crucial, investment Alerts, click here.


Continue on to Looming Policy Warfare: Ignore at Your Peril. by Steve Shefler