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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerFor the past two decades, Jim Lowell developed an industry-leading expertise in analyzing mutual funds, with a particular focus on Fidelity funds. During that time he developed an annual feature known as his "Hot Hands" pick.
He explains, "Those who have followed my Fidelity Investor newsletter know that one trick in our proprietary playbook has been buying the previous year's best performing Fidelity fund and sticking with it for the new year. More often than not it turns out to be a big winner."
Given the growing popularity of exchange-traded funds, Lowell recently launched a new service, The Forbes ETF Advisor. And for the first time, he is applying his Hot Hands approach to ETFs.
He cautions that this strategy has not beaten the market every year. However, he says, "It has provided very healthy long-term result and I believe that many growth-oriented investors could improve their performance by putting a reasonable (5% to 10%) portion of their money to work following my Hot Hands strategy."
He explains, "Here are the ground rules for the strategy. First I looked at all of the diversified ETFs for each year between 2000 and 2006. I excluded single-sector ETFs, and on the international side, I excluded the geographically nondiversified (single country) international ETFs.
"Following a Hot Hands investment strategy from the end of 2000 when you would have put your money into iShares S&P Mid Cap 400 Value, through the end of 2006, when you would have put your money into iShares Latin America 40, you would have netted a total return of 265.2%, while the return for S&P 500 would have been 19.0%."
Why does the strategy work? Simply put, he notes, there is strong evidence that top ETF performance persists. In other word, he states, "Hot Hands stay hot."
So, what is the Hot Hands pick for 2007? Lowell says, "Let history repeat itself again, and -- drum roll, please -– this year's Hot Hands is a repeat performance from last year: the iShares S&P Latin American 40 (AMEX:ILF)."
Steven Halpern is the editor of TheStockAdvisors.com, a free website that provides a daily overview of the latest stock picks from the nation's leading newsletter advisors.
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