Letters to the Editor

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To the Editors:

There is an error in a June 2008 AAII Journal article under the “cons” section for immediate annuities [“Offbeat Offerings: Immediate and Income Annuities,” by Cara Scatizzi]. The article states that “As soon as the annuity holder dies, payments are stopped regardless of how many years might be left in the original contract.” However, term annuities or life with period certain annuities do pay heirs if death occurs within the stated term.

The Editors Respond::

This is correct and the article was in error. The “cons” should not have applied to these types of annuities.

To the Editors:

I believe that value funds are underrepresented in AAII’s Individual Investor’s Guide to the Top Mutual Funds and I suspect that may be due to your selection criteria. Nevertheless, I would like to see them included as it makes my research easier and, more importantly, I would be at ease knowing that other hidden gems have not been left out. For example, Fairholme is in your guide but not Wintergreen, both great value funds.

Eliseo Martinez

The Editors Respond:

When selecting funds for the book, we select an equal number of value funds and growth funds as well as blended funds for a given market-cap range. When selecting funds for the book, we compare the performance and risk of large-cap value funds versus other large-cap value funds to determine which funds make the guide. We always try to compare funds with similar styles that have strong performance relative to their peer group, reasonable risk and acceptable expense ratios.

Tables highlighting top performers for a given time period will tend to be filled with the size and style of funds that performed well for that particular time period. The tables for AAII’s guide are created after the funds are selected.

Wintergreen (WGRNX), a global stock fund, only had two complete years of performance as of the end of 2007. We prefer that funds have three years of performance data before they are added to the Top Funds Guide. It will be considered for the 2009 edition of the guide, but it will have to overcome its high 1.85% expense ratio.

To the Editors:

Your “Guide to the Top Web Sites” [September 2007 AAII Journal] only seems to offer links to sites dealing with buy/sell issues.

What about ownership issues, like how to vote? With only 6% of retail shareholders voting under e-proxy, I would think they could use help. A good site to see how others are voting is ProxyDemocracy at There are many more Web sites on corporate governance issues but this one should be included at a minimum.

James Mcritchie

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To the Editors:

Why are financial firms not included in the AAII Model Shadow Stock Portfolio? No reason for this is given in the Shadow Stock Portfolio rules.

Brian Armist

James Cloonan Responds:

We have nothing against financial stocks, but regional banks and a few insurance companies dominate financials in the micro-cap universe. We feel our selection approach does not work with them.

To the Editors:

I greatly admire Mark Hulbert and the work he has done. However, in his recent article [“Long-Term Newsletter Performance,” July 2008 AAII Journal], he states that four out of 17, or 24%, of the newsletters with long-term records beat the market. It appears that only two beat the market significantly. This would be true of mutual fund records also. That means the chances of beating the market are even smaller than the article concludes.

In addition, statistically, it does not make sense to use the 17 newsletters that survived the period as a basis for calculating the percentage that outperformed the average. This is called the survivorship bias. One has to assume that most of the other letters that were available at the beginning of the period but not at the end did substantially worse than the best survivors. In fact, you can safely assume that none of them would have beaten the average. Thus, if there were 100 such letters, the odds of beating the market significantly would be 2/117 or 1.7%, not 24%.

Doug Korty








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