How Good Are Consumer Reports’ Recommendations
of Mutual Funds?

Abstract

Consumer Reports, the highly regarded evaluator of automobiles, appliances, and a wide variety of other products, provided readers with mutual fund recommendations in 2005 and 2007. Sufficient time has now passed to allow for a rigorous empirical investigation of the returns and risks arising from investing in the mutual funds proposed by Consumer Reports. Examination of raw returns, risks, and risk-adjusted returns indicate that Consumer Reports’ choices outperformed mutual funds, in general, and index funds over the subsequent five years. Further investigation indicates that Consumer Reports’ relative success was especially good during the 2008 recession.