Online Investing Newsletters: Not Worth The Money!
By: David Lewis
If you've been around long enough, you have probably seen folks like Jim Cramer and shows like "Fast Money" on the T.V. I don't follow any of those shows on a regular basis, but I do check them out once in a while. I know right off the bat their "hit ratio" stinks. For example Cramer, although he never admits it, is right about his stock picks about 50% of the time. That's terrible in my book. I can probably do better throwing darts at a board.
I do surf the internet and try to read as much as possible though. And, one of my favorite websites to read when it comes to investment newsletters is the Stock Gumshoe (at stockgumshoe.com). There are probably a million or more ways that investment services try to get you to part with your money, and one of the oldest tricks in the book is to sell you information that will make you rich. The Stock Gumshoe is a pretty good at sniffing out the bogus claims (of which there are MANY).
My question to the folks who sell these stock picks is, if the information is that valuable, why sell it at all?
I, myself, sell solutions to problems (not stock picks). And, normally, they are solutions that either myself or a colleague of mine came up with. I do offer an investment service, but it's a software program that helps you become a better investor by helping you easily analyze stocks. Why sell it? Well, for starters there are a lot of stocks that I can invest in, and I'm not giving out recommendations. Sure, we have a pool of stocks that have done really well, and you're welcome to invest in those, but we don't have any special information other than what the software gives us from the SEC.
The only reason someone would want our software is because it makes investing SO much easier than any other method being used right now. And...the program is transparent. All of the calculations are readily available so you don't think that the program is coming up with arbitrary valuations.
The truth is, there are no investing secrets. This is especially true when you consider insider trading regulations. What kind of "hot tip" do these folks have that you can't find out on your own? most investment services you find online these days are shady at best.
But...even the legitimate services have a common problem...even if they can tell you what stocks, options, or other products to buy...they often leave out the when. The "when" is just as important (if not moreso) than the stock itself.
When do you buy? And if they tell you that, they leave out when to sell. And if they are brave enough to tell you both...should you be cautious of a setup? A pump and dump scheme? How do they know when to get in and out? Why won't they tell you?
The price of a stock is very sensitive to new information, so I would tend to believe that there is little motivation for them to give you the best performing stocks that they know of (if they know of any). If the folks selling the newsletter isn't a professional investor, you don't want his or her info. If they are, why aren't they keeping the info to themselves so that they can make the maximum money from their own picks?
Just something to think about.
David C Lewis, RFA is an independent financial consultant and provides objective financial information about investing online, and other topics related to financial planning.
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