The Factsheet Tricks
10 ways investment marketing can flatter the numbers
In 1954, How to Lie with Statistics showed readers the tricks behind the numbers and became the best-selling statistics book ever.E24 Here's the version for your savings. Each trick is a technique that can be used, backed by research or by the rules written to limit it, with what to look for and what OpenFactsheet does about it.
- 1The lucky start dateA return quoted "since" a date that happens to be a low point.Read trick 1
- 2The big cumulative numberA large total return sounds better than a modest yearly one with a big fall on the way.Read trick 2
- 3Before-fee returnsGross figures look better than what an investor actually receives.Read trick 3
- 4The vanishing fundsFunds that did badly get closed or merged, so the ones left look better.Read trick 4
- 5Show the winnersFrom a large family of funds, advertise the best performers.Read trick 5
- 6The private test runTrack records that began privately, where only the successful ones went public.Read trick 6
- 7The too-smooth lineHard-to-value assets can report returns smoother than reality, so risk looks low.Read trick 7
- 8The perfect backtest"What it would have earned": a simulated record chosen from many tries.Read trick 8
- 9Story instead of evidencePages of outlook and themes in place of risk-adjusted results.Read trick 9
- 10The flattering yardstickCompared with an easy benchmark, a "peer average", or nothing at all.Read trick 10
What three of them look like on the page
Fictional brochure fragments, marked up with what the full record shows. Every figure is computed by the openfactsheet library from synthetic data.
Illustration, not a real fund
6.91% a year since July 2022
Measured from just after the bottom of its biggest fall. Over the full 10 years it grew 3.20% a year, and its worst 12 months were -19.61%.
Synthetic sample fund. Both figures computed by the openfactsheet library from the same monthly returns.
Illustration, not a real fund
Strong long-term growth*
*“Gross” means before fees, not what an investor received. In the SEC's own example, a 1% yearly fee instead of 0.25% leaves about $29,000 less after 20 years on $100,000.E4
*Performance shown gross of fees.
Illustration, not a real fund
Smooth and steady growth
Sharpe ratio of 2.38
Returns look smoothed: each month tends to repeat the last (autocorrelation 0.54). Corrected for that, the score is 1.57.
Illustrative smoothed series. Figures computed by the openfactsheet library.
Two more things to keep in mind
Stars and trophies
Ratings and awards are usually based on past performance. A star record is a weak guide to what comes next.E3
You don't need to spot every trick. You just need one honest summary.
Your money deserves more than a sales pitch.
Share the tricks
These are techniques, not accusations. We don't name or rate any fund or firm.
OpenFactsheet does not name, rate or recommend any investment or firm. The practices described are documented in research and regulation; see Sources.