This week's report is about some research finding from a group in Bellevue, Washington called Evergreen Capital Management, LLC. They have built a proprietary model that is used to predict when mutual fund styles (large-mid-small capitalization, value-growth) are being overbought or oversold. They believe that their model is quite good at predicting returns relative to the overall market over the subsequent two years.
This report does an excellent job of weaving together many of the themes from my past letters and book, Bull's Eye Investing. We find behavioral finance, herd mentality, why investors fail, how Wall Street works, contrarian investing and more. I think you will find the results of their research along with their other comments very valuable the next time you find yourself scanning the top performing funds of the recent past and that is why I chose it as this week's Outside The Box.
John Mauldin, Editor
Outside the Box
AN ASSET ALLOCATION STRATEGY FOR THE INTELLIGENT INVESTOR
Worldcom implosion? Peanuts. Enron scandal? Just a rounding error. Lucent meltdown? Chump change. When it comes to investor losses - as painful as the aforementioned were - these events pale in comparison to the whopper of them all: wrong way investing with mutual funds.
As Forbes magazine pointed out in their December 22, 2003 article, "Our Own Worst Enemy", mutual fund…