Dan Wiener’s Vanguard Mutual Fund Investment Newsletter Promotion

<<<<<< Go to Part 1: Vanguard Index Mutual Funds Versus Vanguard Managed Funds

In this second part of this two part article, we:

• discuss an email promoting a mutual fund newsletter that some of my clients forwarded to me,
• attempt to understand certain rather exceptional investment performance claims for this investment letter,
• try to reconcile these performance claims with the research paper about Vanguard’s passive index funds and Vanguard’s actively managed mutual funds that was summarized in Part 1,
• discuss how performance benchmark selection can affect superior performance claims,
• ask whether Vanguard’s index funds are really for suckers, as Dan Wiener suggests, and
• question whether Vanguard has an incentive to deceive its customers.

Dan Wiener’s promotional email for his The Independent Adviser for Vanguard Investors mutual fund newsletter

When I first read the Rodriguez and Tower “Do Vanguard’s Managed Funds Beat Its Index Funds?” mutual fund investment research study that was summarized in Part 1, I did not pay very much attention to the few bits about Dan Wiener’s Growth Portfolio. Later, some of my financial planning clients forwarded a recent email newsletter promotional piece from Dan Wiener. The more I read of it, the more intrigued I became. Maybe Dan Wiener had some secret sauce to help my clients beat the market using The Vanguard Group’s mutual funds and ETFs.

In his email promoting his finance newsletter, Dan Wiener says that he knows the secrets to unlocking hidden riches from Vanguard investment funds. He said that these are secrets that “Vanguard will never reveal.” His promo email was quite hefty, and it took some time to read and analyze. This mutual fund newsletter promo email came from Dan Wiener’s email address, and Dan Wiener signed this email twice.

After I read Dan Wiener’s email, I went back and reread the “Do Vanguard’s Managed Funds Beat Its Index Funds?” mutual fund investment research study by Abel Rodriguez and Edward Tower. Then, I reread Dan Wiener’s mutual fund newsletter sales piece in finer detail.

Please note that everything I have written here comes just from my reading of the Rodriguez-Tower research paper, from Dan Wiener’s email, and from certain related posts on the Bogleheads and Vanguard Diehards forums (see links at the bottom of this article). I have not done any additional or independent analysis. I may lack information, and I could be wrong in my interpretations.

Nevertheless, when someone asks me to buy a financial product or service that will allegedly help me to improve my investment performance, I want to understand the underlying facts. I simply expect that written investment product sales documents should have reasonable clarity. In my personal opinion, the Rodriguez-Tower research paper does have reasonable clarity, and Dan Wiener’s investment newsletter email promotion does not.

The aggressive selling of a Vanguard mutual fund newsletter

First, let me summarize the type of email that Dan Wiener sent to my clients and perhaps to many more people. Have you ever found yourself on a colorful and extremely loooooooooooong webpage that pounds an emotionally laden sales message over and over and over from many different angles? That is what this promotional html email from Dan Weiner is like. I printed his email to save myself from a lot of scrolling and to take some written notes. When printed, this investing newsletter email promotion was 16 pages long.

A red border surrounds the promotional copy of Dan Wiener’s email about his finance newsletter. As his sales message progresses, you find that you could get not just 1, but 2, 3, 4, and 5 bonus gift books, if you just sign up NOW! Visions of bonus sets of Ginsu knives filled my head. Ron Popiel might smile about this sales pitch, although the subscription cost of this investment letter substantially exceeds the price points of the products that Ronco sold on TV.

Multicolored text in a wide variety of fonts repeatedly urges you to sign up for this investment newsletter. There are no less than 18 hyperlinks and buttons that each will take you to the same ordering page. On that ordering page, you can select a two-year “Best Value” subscription for $189 or a one-year “Great Value” subscription for $99.95.

Now, everybody needs to make a buck somehow. There are families to feed; mortgages to pay; SUVs to fill with $4.00 per gallon gasoline (not me), etc. Furthermore, this kind of very aggressive promotional email may actually be what is really needed to get people to take action and to place an order for one of these investing newsletters. If the long form of this promotional email is what it takes to sell an investment newsletter, then fine. Presumably Dan Wiener uses an opt-in email list and the people he solicits can just delete his message, if they are not interested.

Nevertheless, despite the sales pressure, it seems to me that the content of any promotional email should reasonably and fairly describe the value of the investment product or service being offered. It also seems to me that the quality of such an email promotion for a financial newsletter might also be indicative of the quality of the actual newsletter to which I am so strongly being urged to subscribe.

My clients were confused my Dan Wiener’s pitch. I looked at it to see if I could clear up the confusion. Maybe I did. Maybe I did not. You decide.

Financial nirvana with Vanguard’s managed investment funds versus the Vanguard passive index fund end of days?

Let’s take a look at the content of this promotional email from Dan Wiener. Almost immediately, in the email you are offered a very stark choice, which says “You can a) do nothing and loose 40% of your money in 2008, or b) make 144% more money than the average Vanguard investor.” Aw shucks. Of course, I will take choice “b”. Where can I sign up? With 18 links and buttons for me to get to Dan Weiner’s ordering page, signing up for The Independent Adviser for Vanguard Investors should be a breeze.

However, to say the least, the copyrighting of this aggressive email is not a model of consistency and clarity. Since I have a belief that the accuracy of a financial newsletter’s promotional email might indicate something about the quality of the financial newsletter itself, I dive in to see if I can figure out this email anyway. Perhaps, things will become crystal clear, as I read more.

The good news is that I already have some information as background. I had already read the “Do Vanguard’s Managed Funds Beat Its Index Funds?” mutual fund study by Rodriguez and Tower, which briefly looked at Dan Wiener’s Growth Portfolio results. (See Part 1 of this two-part article.)

Now, let us look more closely at the claim that you will make 144% more in 2008. Let’s assume that the average Vanguard investor gets a real dollar passive broad market equity index return of maybe 5%. (This might seem a bit low, but let us assume that the US stock market glory days of the 1980s and 1990s are past. In addition, let us keep inflation out to the returns so that my “real dollars” will have constant purchasing power.)

Apparently, by following Dan Wiener’s advice I will make 144% more that 5%, which means about 12.2% annually in real dollar terms. Any sensible investor would salivate over this kind of reliable, long-term stock market return. We are talking about an equity return of over 15% annually with inflation included.

This investment performance sounds very good so far. Let’s assume that I can keep getting this extra 144% return year after year. With compounding, after 10 years I will have a portfolio that is about 1.9 times greater than the average Vanguard investor. After 20 years, it would be 3.6 times greater. After 30 years, it would be 6.9 times greater.

With these superior investment returns, all I need is about a $1,400 portfolio, and I will roughly break even on the $100 annual cost of Dan Weiner’s newsletter. With any larger portfolio, Dan Weiner’s great advice will be pure gravy. This sounds like a great bargain. Where can I sign up? Oh, I see the ordering links and buttons. Thank you. Thank you.

What is the source and precision of the out performance of Dan Wiener’s Growth Portfolio?

But, wait. Now, maybe I should not jump into this too fast, although it sounds very, very appealing. I certainly do not want to lose 40% of my money in 2008, and I sure would instead like to make 144% more than the average Vanguard investor. However, I am not sure where either of these “lose 40%” or “make 144% more” numbers comes from, so I keep reading. I will focus on trying to figure out where the “make 144% more” number comes from, because that is the path that I want to take. I wanna be rich. I want my clients to be even richer.

Well, Dan Wiener’s email has a whole bunch of numbers, and he makes a lot of numerical claims. However, these numbers do not always seem to be consistent. Furthermore, his numbers also seem to be inconsistent with The Hulbert Financial Digest data about Dan Weiner’s Growth Portfolio. These Hulbert numbers were discussed at the end of the “Do Vanguard’s Managed Funds Beat Its Index Funds?” mutual fund study by Abel Rodriguez and Edward Tower.

Reading on into this investing newsletter email, however, I do think that I have figured out where the 144% number came from. I could be wrong, because Dan Wiener’s investor newsletter email promo did not come with any explanatory footnotes. However, one of the email’s sidebars makes three statements above a table of numbers, which were: “How Dan’s Vanguard Midas Touch Has Made His Subscribers Rich,” VANGUARD MADE BETTER!,” and ‘You Can Easily Make 144% More Money This Year.” In that sidebar, Dan Wiener’s investment newsletter promo presents two columns of annual numbers starting in 1991 and going through 2007 for a period of 16 years apparently.

The first column is for the “Average Vanguard Investor” who starts with $100,000 and ends up with $409,061 in 2007. The second column is for “Dan’s Growth Model Portfolio” which also starts at $100,000 and ends up at $996,083 in 2007. Just below these numbers it says “% Advantage 144%; Extra Profit: $587,022” and just below that there is an ordering hyperlink that says: “Members of Dan Wiener’s service are nine times richer than the average Vanguard investor. Join Dan today.”

Now, unfortunately, I am even more confused. The email said that I could make 144% more than the average Vanguard investor in 2008. Yet, instead, that 144% number appears to be a comparison of cumulative assets after 16 years of compounding. Furthermore, the ordering link says that “Members of Dan Wiener’s service are nine times richer than the average Vanguard investor. Join Dan today.” But the text just above says they have 144% more. You might appreciate why I am starting to have some questions about the precision of the numbers in Dan Wiener’s email.

Gosh, if there is a seeming lack of precision in the investment performance numbers he promotes, then how can I reasonably expect that there will be a high degree of precision is the development of Dan Weiner’s portfolios and newsletters? Things like this just make me nervous. I prefer precise accounting and detailed performance evaluations.

Maybe it is just me, but there has been too much loosey-goosey accounting going on in the investment world recently. Worldcom, Enron, Tyco, and the others went down or under, and their accounting numbers were not completely transparent. I also remember something about the Beardstown Ladies investment club ten or so years ago. They reported substantial market out performance over the years, and they wrote some best selling books. Unfortunately, upon closer examination it seems that they had some trouble doing proper performance accounting, and they actually trailed the S&P 500 by several percent annually for over a decade.

Investment performance discrepancies between Dan Wiener’s mutual fund newsletter promo and the Rodriguez-Tower “Do Vanguard’s Managed Funds Beat Its Index Funds?” mutual fund study

Be “nine times richer than the average Vanguard Investor” in 16 years? “Make 144% more money than you did in 2007?” Have a 144% “advantage” over Vanguard S&P500 index investors, after 16 years? “Lose 40% of your money in 2008.” Well, Dan Wiener’s investment newsletter email promo has not yet cleared things up for me. Perhaps the Rodriguez-Tower study can help me to understand which of these numerical claims might be correct.

Unfortunately, even less clarity emerges. Using data from The Hulbert Financial Digest the Rodriguez-Tower study concluded that Dan Wiener’s 16 year historical Growth Portfolio results provided an average annual excess return of 2.27%, when benchmarked with the broadest US stock market index. Calculated using average annual returns, the cumulative value of this incremental return over 16 years is in the 40% range plus or minus several percent. (The cumulative comparison would depend somewhat on the baseline growth rate.) (Also, just to remind you, 40% is over 100 percentage points lower than Dan Weiner’s claim of making 144% more. Somewhere between Dan Weiner’s numbers and The Hulbert Financial Digest numbers quoted in the Rodriguez-Tower study, we fell off of a pretty big performance cliff!)

In Part 1 of this two-part article, we accepted the possibility of a 2.27% skill based excess performance for Dan Wiener’s Growth Portfolio, when it was compared to the Wilshire 5000 US stock market index. We did not discuss the perhaps reasonable observation that Dan Wiener’s historical Growth Portfolio results might better be compared to a growth stock benchmark. (The technique of using best-fit benchmarking to discern whether investment results are likely to be due to investment fund manager skill versus variations has become widespread in the investment research literature. Rodriguez and Tower apply this technique in the body of their “Do Vanguard’s Managed Funds Beat Its Index Funds?” investment research paper.)

Benchmark, benchmark, who has an appropriate performance benchmark?

Despite having ignored this potential benchmarking problem thus far, Dan Wiener’s aggressive email pitch for his investor newsletter resurrects this topic. In his email, Dan Wiener goes on for a few pages about how Vanguard apparently mistreats its passive index fund clients. Here are various quotes: “Indexing Is (How Can I Say This Nicely?) for … Suckers. Maybe that’s a bit harsh.” [His words are in red lettering, and this is his punctuation.] “If all but the 50 largest stocks continue to gain over the next 15 years, you’d continue to lose money the whole time.” “Index funds are, once again this year, set to dip, then dive.” These statements are followed by a lot of worrisome statements about high-risk growth stocks, high P/E stocks, index dogs, and so on.

Well, maybe the Wilshire 5000 then is not the appropriate benchmark for analyzing Dan Wiener’s historical performance record after all. Maybe the results should be benchmarked against other growth funds of similar style. Dan Wiener’s email pitch was ambiguous about whether his numerical comparisons were with the S&P 500 or Wilshire 5000 indexes. (My guess is that he was using Vanguard’s S & P 500 index fund.)

In their comparison of Vanguard’s passive index funds and managed mutual funds, Rodriquez and Tower used a refined best fit statistical technique to determine which of Vanguard’s passive index funds and actively managed mutual funds were appropriate to compare. This enabled reasonable apples to apples style comparisons. Dan Wiener’s investment newsletter email seems of offer performance comparisons involving apples, oranges, bananas, grapes, kiwis, etc.

In their remarks about Dan Wiener’s Growth Portfolio, Rodriguez and Tower did not apply the same best find benchmarking methodology. They just used numbers from the The Hulbert Financial Digest, which used the Wilshire 5000 as the benchmark index. Well, the Wilshire 5000 encompasses the S&P500. The S & P 500 captures somewhat more that 70% of total US equity market capitalization and is skewed to include the largest companies in terms of market capitalization. The Wilshire 5000 includes just over 5000 US stocks and encompasses almost 100% of U.S. stock market capitalization measured by trading volume. Neither index is skewed toward a growth investment style. Neither index includes any international equities.

What else might be going on with all these contradictory investment performance numbers regarding the historical performance of Dan Wiener’s investment newsletter Growth Portfolio?

After all these claims and this analysis, I have no way of telling whether Dan Weiner really has any “beat-the-market” or “alpha” skill to offer, or whether his newsletter is or is not valuable.

First, what is really an appropriate performance benchmark for Dan Wiener’s Growth Portfolio over 16 years? Has the investment style been consistent or have there been some investment style changes or style drift? If so, have these changes been prescient or not? What Fama-French multifactor model elements might be at play? He calls this his Growth Portfolio. Is it really? What are the large capitalization versus small capitalization implications? What had the US versus International composition been of this growth portfolio? Has there been any successful or unsuccessful market timing going on? Has there been any successful strategic asset allocation going, i.e. shifting any proportions of the portfolio into and out or cash or fixed income assets in a prescient or not so prescient manner?

Without belaboring the history of investment portfolio theory and the associated academic literature, there is little controversy over the value of portfolio diversification. If we assume that one has established a personally risk appropriate allocation between the major financial asset classes of cash, fixed income, and equity securities, we can look at the internal composition of each of these major asset classes separately.

Now, let us look just at the stocks or equities asset class. While the degree of required equities diversification sometime confuses investors, there is a simple rule to follow. The rule is: diversify globally and completely. If one targets a globally diversified personal portfolio that is reasonably proportionate to the market capitalization across the globe, then the composition of your portfolio and the theoretical sweet spot for portfolio mean variance optimization can be expected roughly to coincide.

Frankly, my guess is that all Dan Wiener’s hype about superior performance has much more to do about global diversification and little to do about superior performance or the generation of excess returns or “alpha.” When appropriately benchmarked, I am guessing that these claims of supposedly superior investment performance would just disappear. Despite all Dan Wiener’s claims to the contrary, there is a reasonable possibility that there might be not any superior performance here at all. This might all be due to a lack of diversification on the part of S&P500 index investors. Comparing the performance of a globally diversified multi-capitalization portfolio to a much less diversified US large capitalization portfolio might look like superior performance, when in fact it is really just a failure to diversify globally.

There are reasonable alternate explanations for this. While I do not have access to composition of Dan Weiner’s Growth Portfolio, there is enough chatter on the Bogleheads and Vanguard Diehards Internet forums to reasonably assume that the Growth Portfolio may have had a reasonably large minority allocation to international equities for an extended period. If this is the case, this might be a diversification issue and have nothing to do with truly superior performance in the sense that one more cleverly picks one stock over another or one investment fund over another.

Dan Wiener’s Growth Portfolio could have been much more globally diversified at a time when US stock index investors were staying too close to home and investing too heavily in large capitalization stocks. If so, then that kind of prescience would deserve some respect.

Performance chasing and active management to beat the market is an overly familiar investment sucker’s game. Globally diversifying and getting there earlier than most other US investors is not. Brag about that, and I would be impressed. Select weakly related performance benchmarks to make your investment performance look stronger, and brag about that supposed excess performance, and I am not impressed.

Investors spend far too much money, time, and effort chasing performance to beat the market. Instead, they would be far better off getting their investment strategy in order at the outset. Let me repeat what I said at the beginning of Part 1: Use a very low cost, fully passive, and globally diversified investment strategy!

Marketing superior performance to the public — where is the sucker?

To summarize, these are my observations about Dan Wiener claims of performance superiority:

A) If Dan Wiener claims a nine-fold advantage, I am sorry, but one should not compare the current asset value of one portfolio to the asset value of another 16 years ago.

B) If Dan Wiener claims a 144% advantage over a very low cost, passively managed S & P 500 index fund, then his competing investment strategy should have been to pick the best S&P 500 firms and avoiding the dogs. If he could beat the S and P 500 head to head over 16 years, then that is really something that he should be proud of. The SPIVA data shows that the longer active funds try beating the passive S&P500 index the more dismal the record of actively managed S&P 500 mutual funds becomes. If he claims a 144% advantage without clarifying that he is using an apples to oranges comparison, then this is not so appealing. If he accuses Vanguard of lying over the matter, then this is far less attractive. Since he is not managing his own mutual funds to produce a 144% advantage, but he apparently is just substituting other Vanguard funds into a portfolio, then it sounds like he is biting the hand that feeds him. In my opinion, that is just rude.

C) If Dan Wiener claims a 16 year 144% performance advantage and then states that two Duke University professors “conclude that my way of investing in Vanguard funds has an 87% probability to continue to outperform index funds for the foreseeable future,” then I seems odd that he does not also mention that that study’s numbers implied a far lesser 16 year “positive alpha “advantage of around 40% or so. Why this 100% percentage point difference? From what I can tell, but cannot be sure of from the confusing information presented in this mutual fund newsletter promo, this may be primarily because the performance comparison was with the S & P 500 versus the Wilshire 5000. Furthermore, he fails to mention that those professors made absolutely no predictive statements. (See below.) Finally, he fails to mention that in footnote 15 Rodriquez and Tower said that any apparent skill level was probably below 87%.

Frankly, this kind of selective marketing of supposedly superior performance to sell investment and other financial products and services is practically an epidemic in the financial services industry. (See for example, “How Morningstar Ratings for mutual funds are used as a marketing tool” on The Skilled Investor website.) Most often such superior performance promotional claims are simply due to market volatility, randomness, and inappropriate performance benchmark marketing. With Dan Wiener’s investor newsletter email, the exact location of the performance benchmarking bull’s eye still remains elusive.

Does The Vanguard Group keep its mutual fund and ETF investors in the dark? Does Vanguard lie to its customers?

Moving on through this investor newsletter email promo from Dan Wiener, we next are told that all we need to do is to sign up for his newsletter and Dan Wiener will “reveal 19 Vanguard secrets” … “Unfortunately, most Vanguard investors won’t have a say in the matter. Vanguard won’t give them or you the choice. They won’t tell you what to do, no matter how bad things get in 2008.”

Now, I do not have much of a clue about what Dan Wiener is talking about. Is he imposing an advisory obligation on Vanguard? While Vanguard more recently has offered some investment advisory services for a fee, Vanguard is a mutual fund company. Like all the rest of the mutual fund industry, Vanguard offers an array of funds to choose from. It has no obligation to tell you which is best or to tell you what to do. You do that yourself or you hire (hopefully an objective) financial advisor or investment counselor to help you.

In a sense, individual investors are lucky that that Vanguard does not make choices for them, given the mutual fund industry’s history of high costs and performance hyping. Vanguard is one of the few companies that refuses to hype 4-star and 5-star funds and use misleading performance graphs in its advertising. (See the bottom of Part 2 of this article: “How to lie with statistics: Investment performance charts” on The Skilled Investor website.)

I probably will never learn the secrets that Dan Wiener knows and that Vanguard is withholding from me. He really lost me when he had some apparent difficulties with consistent math. When he talks about Vanguard’s secrets, is he talking about Vanguard’s managed funds? Vanguard’s ETFs? Mutual funds that Vanguard closed to new investors due to excessive capital inflows? It is all on Vanguard’s websites. Go look. If you want the opinions of other Vanguard investors, take a look at the Bogleheads Investment Forum and Vanguard Diehards forum.

I understand business, economics, and the capitalist system reasonably well. I do not believe much in financial cabals, although concerns about monopolies and oligopolies seem quite real to me. Self interest drives capitalism. However, in a financial industry that often exhibits borderline marketing and sales practices toward individual investors, over the years I have reached the conclusion that Vanguard is one of the good guys. I also reached the conclusion that John C. Bogle is one of the honest men of the industry. Vanguard is out to make a profit — a reasonable profit. That is much more than I can say about many other parts of the financial services industry. (See: “Have You Given Enough to the Financial Services Industry?” on The Skilled Investor’s Personal Finance Blog.)

While much of the rest of the industry is pushing overly costly investment products, Vanguard developed the low cost index mutual fund market and has added managed funds, ETFs, and a variety of other services. More so than other financial services companies, individual investors have to seek out Vanguard’s products, because Vanguard does not fund massive corps of heavily commissioned “producer employees” and third sales “financial advisor” agents like the retail arms of the investment bank wirehouses, insurance companies, and other financial firms do. Very often, supposedly objective financial advisors and investment counselors will not recommend Vanguard’s fund products, because they can make a great deal more money from you by selling you expensive investment products that are good for them, but bad for you. (See: “Pay less to get more” on The Skilled Investor website.)

So when I read an aggressive email promoting an investment newsletter that can’t seem to do math and benchmark comparisons consistently and that feels it is has to disparage the ethics of a company like Vanguard, well then that kind of newsletter marketing message just falls a bit flat for me. If Dan Wiener truly has some skills, at least I would be far more interested in subscribing to his investing newsletter, if he clearly described how his services were complementary to Vanguard’s and were a valuable addition to the already very valuable offerings provided by Vanguard.

The “Do Vanguard’s Managed Funds Beat Its Index Funds?” research paper – a “liberal” interpretation

Weary reader: I promise that I am near the end of this commentary. However there is one more issue that is worth covering. In addition to disparaging Vanguard’s ethics, Dan Wiener seems to a bit of difficulty accurately describing what the Rodriquez-Tower study said.

Quoting from another sidebar in Dan Wiener’s email, Dan Wiener said: “Dan’s strategy is simple, yet powerfully effective. His deep knowledge of Vanguard, his investigative insights, and his investment results prompted two Duke professors to study his methods … under a microscope.” “The study’s conclusion: The probability that [Wiener’s] Growth portfolio could have outperformed by such a wide margin because of luck rather than skill is only 13.4%”

Well, first I was unable to find any mention from Rodriguez or Tower that they conducted their study due to Dan Wiener’s “deep knowledge of Vanguard, his investigative insights, and his investment results.” I found nothing in the “Do Vanguard’s Managed Funds Beat Its Index Funds?” research paper that credits him. He was not on the credits for this paper that Professor Tower provided in the forum discussions.

The Rodriguez-Tower investment research paper only briefly looked Dan Weiner’s Growth Portfolio record at the end. Rodriguez and Tower undercut this performance claim through their reference to The Hulbert Financial Digest, ratings of his four funds (See footnote #15 in the Rodriguez-Tower paper.) Furthermore, their analysis discredits Dan Wiener’s claim of Vanguard’s bias and favoritism toward its passive index mutual over its managed mutual funds.

Interestingly, Dan Wiener again seems to treat facts somewhat cavalierly. In the main body of his promotional email text, he says: “Turns out, everyone (except my members and me) is wrong about indexing. The two Duke University professors I referenced earlier conclude that my way of investing in Vanguard funds has an 87% probability to continue to outperform index funds for the foreseeable future.” (Note that the underlining was Dan Wiener’s and not mine.)

Dan Wiener continues, “I already knew this, of course, except for the “87%” figure. I think that number is much higher. Anyway, it’s nice to have a comprehensive study conducted by a major university confirm what members of my service knew the day they joined.”

These statements is stunning to me. Rodriguez and Tower performed a simple statistical test on historical data about the performance record of Dan Weiner’s Growth Porfolio. They made no prediction. Investment studies are always historical and never predictive. The only data available is historical. In general, professors do research, and rarely are they so foolish as to attempt to predict the fundamentally unknowable future. Objective statistical research cannot be predictive, because it simply does not have any data points from the future.

Should I believe Dan Wiener’s superior performance predictions or his small print?

To sell his newsletter, Dan Wiener claims in his email that his special strategy has at least and 87% probability of outperforming Vanguard’s index funds into the foreseeable future. He says directly that the real probability is much higher that 87%. Sounds like money in the bank for his mutual fund newsletter subscribers.

To make this claim, which he underlines in his aggressive email promotional text, Dan Wiener dons the endorsement mantle of two Duke University professors. However, in reality, these professors have undercut his claims, and they have provided no endorsements. Dan Wiener blithely converts what is simply an historical research statistic into a prediction which is supported by Duke University professors. Then, he claims even greater skill than the historical statistics that were reported. Dan Wiener ignores The Hulbert Financial Digest, data completely.

With such an endorsement from Duke University professors and with Dan Wieners prediction that he is almost certain to outperform Vanguards index funds, then maybe I will change my mind and sign up for Dan Wiener’s mutual fund investment newsletter. Therefore, I again click on one of his plentiful ordering links and buttons to get to the ordering page.

As you already understand from this article, I can be a cautious sort of fellow. Therefore, I decide to read the entire ordering page in detail before ordering. At the bottom the order sheet, the small print says “This is a solicitation for The Independent Adviser for Vanguard Investors, a monthly general interest newsletter which is not liable for the suitability or future investment performance of any securities or strategies discussed. Historical investment return examples given are hypothetical, and not to be taken as representative of any individual’s actual trading experience.”

WTF??? Why does the legal small print say quite the opposite of Dan Wiener’s financial newsletter email promo? He says he thinks that his success rate will be “much higher” than the 87% probability of future success that was supposedly bestowed by these two Duke University professors. Which of these two choices should I believe?

Well, I guess that am going to keep my $100. If Dan Wiener a) cannot seem to offer consistent numbers, b) feels the need to bite Vanguard’s hand rather than stand solely on his own merits, c) does not seem to interpret carefully an investment research study that mentions him, and d) contradicts his own performance projections, then maybe I am not really interested in knowing what is inside of his investment letter after all.

Also, I have decided that will also keep my respect for Vanguard. In addition, I will also keep my respect for disciplined academic investment research. It seems to me that I can find a wealth of objectivity about investing in the academic research literature. However, whenever someone in the financial services industry stands to earn a buck off of me or my clients, the facts often very quickly begin to lose their sharpness. The quality of investment information is often very low when it comes from a source that is simultaneously reaching into my wallet or into the wallets of my financial planning clients.

<<<<<< Go to Part 1: Vanguard Index Mutual Funds Versus Vanguard Managed Funds

Bogleheads and Vanguard Diehards forum discussions about Dan Wiener’s mutual fund newsletter

By the way, if you want to read some forum discussions about Dan Wiener’s mutual fund newsletter, here are some links:

• Dan Weiner newsletter on Bogleheads Investment Forum
• The Independent Adviser on Bogleheads Investment Forum
• Ed Tower examines managed funds and Dan Wiener’s portfolios on Bogleheads Investment Forum
• Dan Wiener and FFSA on Morningstar Vanguard Diehards