According to Parkinson's Law, "work expands so as to fill the time available for its completion." The Internet has validated that observation by increasing exponentially the number of outlets for disseminating information. In the financial arena, the consequences have been unfortunate. Anyone with a computer can post a financial blog. According to a recent article by Jake Mann on Insider Monkey, there are more than 6,000 news sites on the Internet, and a "crucial subset" are financial sites. That's the part Mr. Mann got right.
The balance of his blog post is his picks for the "100 best financial blogs." In his introduction, Mr. Mann sets forth his flawed premise for making these selections: "We believe the best way to become one of the top 100 finance blogs is by helping our subscribers outperform the market by investing in the best ideas of the best hedge fund managers."
Mr. Mann does not spend much time elaborating on the basis for this "belief," which is understandable. My colleague Larry Swedroe correctly noted that hedge funds are "an unmitigated disaster" and that they have had "a hard time keeping up with the returns of T-bills on a risk-adjusted basis."
If Mr. Mann identifies the "best hedge fund managers" by looking at their past performance, his advice is on shaky ground. Studies indicate that the likelihood of performance persistence lessens when new money pours into funds with stellar past performance because of capacity constraints. I am unaware of credible data setting forth a methodology for reliably and consistently selecting hedge funds that will outperform comparable benchmarks over the long term.
The harsh reality is that investors would be far better off ignoring much of the news in the financial media and many of the blogs on Mr. Mann's list -- particularly those that profess an ability to "beat the markets."
There are financial sites and financial journalists that add value to investors. The information they disseminate is based on sound, academically-based data. Here are some of my personal favorites (in no particular order):
Bogleheads Forum: Excellent discussions based on the views of John Bogle, the founder and retired CEO of The Vanguard Group.
Index Universe: Extensive coverage of product and market developments related to index funds.
Efficient Frontier: The webpage of financial author William J. Bernstein. He is the author of stellar financial books, including The Four Pillars of Investing.
DailyWombat: The blog posts of author and financial journalist John Wasik are sound and thought-provoking.
Vanguard.com: The leader in low-management-fee index funds publishes a series of academically-based white papers on investing that are must-reads for those interested in responsible, evidence-based investing. Here's an excellent example.
William Sharpe: The blog of the 1990 recipient of the Nobel Prize in Economic Sciences is not only soundly premised (as you would expect) but it is easy to understand and impossible to refute.
Carl Richards: My colleague Carl Richards tells you everything you need to know about investing distilled to the space of drawings on a napkin. His blogs on The New York Times' website are timely and invaluable.
USNews.com: The retirement section contains sound financial advice for those confronting the challenges of planning for retirement (full disclosure: I am one of the bloggers for this site).
I'm sure I have left some out. If you have suggestions, please add them to your comments.
Dan Solin is the director of investor advocacy for The BAM ALLIANCE and a wealth adviser with Buckingham Asset Management. He is a New York Times best-selling author of the Smartest series of books.
The views of the author are his alone and may not represent the views of his affiliated firms. Any data, information and content on this blog is for information purposes only and should not be construed as an offer of advisory services.
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