Perhaps the most crucial methodological principle we follow when monitoring a newsletter’s model portfolio is that we execute recommended trades at the prices prevailing when an anonymous subscriber would have first been able to act on the recommendation. Specifically:

• If the recommendation is received before the opening of NYSE trading, the recommended trade is executed at the average of the security’s high and low prices in that day’s session.
• If the recommendation is received after the NYSE opens but before the close of trading, the trade is executed at that day’s closing price.
• If the recommendation is received after the close of NYSE trading, the trade is executed at the average of the security’s high and low prices in the subsequent day’s session.
• If an adviser wishes a trade to occur at other prices—such as at the opening, or at limit prices—then he/she must explicitly say so.

Regardless of whether a market order is executed at the closing or the average price, however, the HFD adjusts that price upwards (when buying) or downwards (when selling) according to an estimate of that security’s bid-offer spread on that day.

The HFD debits a commission on all transactions, the rate of which is based on average commissions at the nation’s largest discount brokers on average-sized transactions. (This rate changes periodically to reflect current conditions.) The one-way commission rates currently are 0.05% for stocks, 1.5% for options; and for futures contracts 0.05% of the contract’s value. Mutual fund loads and redemption fees are debited.

The HFD’s calculations do not take taxes into account. However, dividends, splits, corporate actions and fund distributions are credited on the day the security goes ex-dividend.

When a newsletter’s advice is ambiguous the HFD constructs portfolios for it. The HFD applies the same methodology across the board for all such newsletters. Click here for a description of this methodology for ambiguous letters.

Note that, since January 2016, when the Hulbert Financial Digest was closed by MarketWatch/Dow Jones, the HFD has continued tracking investment newsletters under a business model in which newsletters pay to be audited. All monitored newsletters pay the same fee.