In case you missed it, the latest survey of top analysts is out. And its headline is: "When Good Analysts Make Bad Calls."

Not to mention its odd timing, the article trumpeting Institutional Investor 's All-American Research Team opens by talking about this year's top-rated insurance analyst. The magazine points out that he was bullish on American International Group "right up to the moment in September when it was seized by the U.S. government."

"Todd's stock picking has not been great," an unnamed money manager told the magazine. "However, he thinks about the space in a creative way, understands the main drivers and articulates his themes well."  

It seems like an annual right of passage. Each year, esteemed financial publications ranging from Forbes to Barron's come out with their latest picks for the best stocks and fund managers. The Institutional Investor''s list is somewhat different in that money managers are surveyed to select top analysts in each respective sector.

I've had the pleasure of interviewing and working with many of the magazine's top picks over the years. I'd agree they're all smart, innovative and experts in their selected sectors.

But it also might be worth pointing out that if an investor had picked something like the Vanguard Total Stock Market ETF (NYSE: VTI) or SPDRs (AMEX: SPY), they could've owned AIG in an already efficient risk-adjusted manner. No analysts, no managers—and fewer bucks—coming out of your pocket to pay such talented stock pickers.

Focusing On What You Can Control

Advisors stress that cutting expenses is more important now than ever. That's due to the fact that with markets tanking, the less you have to fork over to fund companies, the lower your overall costs. It's worth noting that last year, Matt put together a broad-based portfolio of ETFs with a total expense ratio of less than 0.14% a year.

That portfolio wasn't intended to serve as a model for investors. Instead, it was offered as an illustration of the possibilities investors now can take advantage of at any given time. (See story here.)

Besides more low-cost funds to choose from than ever before, investors trying to deal with the current bear market need Wall Street's analysis even less these days, because little tweaks just aren't providing much of a lifeline.

Consider a portfolio with 60% allocated to VTI and 40% to iShares Lehman Aggregate Bond Index (NYSE: AGG). Heading into Monday, it had lost nearly 22% so far in 2008.

If you went to a 50-50 portfolio, the return would've stood at -19%. So, in exchange for unloading 10% of your stocks, you'd reduce losses by about 3 percentage points.

At 40% stock and 60% bonds (using the same two-ETF portfolio), returns were -16% through Friday's close. In other words, you're going to need to slash your stock holdings by around 20% to get a 6 percentage point easing in bottom-line losses.

Bigger Isn't Always Better

But there are other problems with making changes in midstream. These return numbers will only hold up if you shifted allocations before the first trading day of the year. If that didn't happen, then you're basically making calculations on an annualized basis. In that case, they only hold up if today's conditions remain similar for a year out.

Realistically, all we're discussing here are paper savings. But for arguments sake, let's continue.

To boost returns—and reduce losses—by 10% right now, you'd have to slash a 60% stock portfolio (using these two total market ETFs) by more than half. (A 30% stock/70% bond allocation would leave you with a -13% return. It would take an allocation of close to 75% AGG to shave your losses this year by double digits.)

And when there's little place to hide, adding more funds to highlight different asset classes can only do so much. For example, real estate investment trusts are outperforming the broader market, but only by single digits. The Vanguard REIT ETF (NYSE: VNQ) was one of the relatively better performers at week's end, with a 6.5% advantage over the S&P 500 index, according to Morningstar.

Another useful long-term diversifier, foreign stock, is actually doing worse this year than the broad domestic market.

Even widely diversified commodities funds such as the iPath Dow Jones-AIG Commodity ETN (NYSE: DJP) is heavily underwater, down more than REITs and losing 8% more than the S&P 500.

Murray Coleman is managing editor at IndexUniverse.com. He can be reached at: This e-mail address is being protected from spambots. You need JavaScript enabled to view it .