This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

WSJ's Zweig Misfires Touting Latest Back-testing Breakthrough

In fact, the arc of events that follows the discovery of a hot new stock-picking advantage is very predictable :

  • A "successful investing strategy" is discovered by back-testing, though the strategy never had any actual money following it;
  • Cue the mutual fund sponsors to quickly cobble together products to take advantage of this newly discovered can't-miss strategy;
  • The marketing machines are revved up to move fund investors' billions out of their current funds (Target-Date Funds were the last big ruse) and into these new (Quality) funds.
  • Fast forward three years when Morningstar rates the first of these to reach their third anniversary: Three Stars (i.e. mediocre).
  • Wait for the inevitable gnashing of teeth at the mutual fund houses as Chief Investment Officers and Portfolio Managers pore over their spreadsheets searching in vain for how on earth such WILDLY POPULAR funds could fail to outperform?
  • Listen carefully for the quiet snickering of fund sponsors rolling in their management fees, whispering about what new academic research they'll next use to hoodwink a new set of marks, er, muppets, er, investors.

It’s a sad and cynical path and of course the fund sponsors have reaped what they sowed by enduring epic fund outflows from actively managed funds for the past five years.

Toward the end of Mr. Zweig’s more recent column, he seems to hedge his earlier enthusiasm:

There's no rush. Let the funds launch and get seasoned. See whether the managers can deliver. Then wait some more, sitting out the inevitable boom in popularity. Before long, investors will be complaining that quality is overrated and that other investing styles work better.

All good advice. But then Mr. Zweig hedges on his hedge:  “Mark my words: At that point you will be able to get quality in quantity.”

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,062.57 +8.86 0.05%
S&P 500 2,093.16 +4.39 0.21%
NASDAQ 4,809.2020 +2.3430 0.05%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs