I've been using investment newsletters/subscriptons for years. Many are quite low-priced and some are free to the individual. A lot are garbage, but some are very good.
When you have a lot of money to invest and you're not using a financial adviser (some good and some bad but it is another topic) and not paying for investment services, it could be a big mistake to your financial health.
Most likely you need a computer, connection to Internet and a spreadsheet in order to use them effectively.
I'm not going to compare specific systems/newsletters, but will include general pointers on how to select them.
First, you need to find what you need and how much time you can afford to use them. If you have a $10,000 or less to invest, most likely you just buy a ETF like SPY as your investment both in money and time will not pay off.
* Newsletters giving you specific stocks to buy do not require much of your time. However, if they're successful, there are too many followers buying the same stocks to drive their prices up temporarily.
* In addition, if the volumes of these stocks are small, they could be manipulated easily either by the newsletter owners and/or by your peer subscribers. I could be millionaire many times if I were the helper of a popular TV show on stock recommendation by buying the recommended stocks before they're aired.
* I like to use systems that can find a lot of stocks like some providing many searches. However, it will take a lot of time to learn and test their performances. Most likely, you need to further research each stock before you buy them.
From my experience, the best stocks could not be the better performer esp. in shorter term (less than 6 months). My theory is they've been identified by most researches.
* Do not trust the performances of the newsletter providers.
There are many ways to manipulate their performances:
1. They buy at the lowest prices of the day and sell at the highest prices of the day.
2. Survival bias. In simple term, the stocks will not be included if they lose all the value like many penny stocks. For example, Lehman Brothers is not included in most data bases.
3. Most compare with S&P 500, but without the dividends. For the last 10 years, S&P 500 has an average annual return of 1% on appreciation and 2% on dividends. So, you should compare to 3% or so and not 1%.
If they use real money for the portfolio, then you can trust their performance.
* We all get mails about how they can triple your investment. Just throw them to the garbage bin. If it is that good, most likely they will keep them for themselves.
If they list the 200% or so returns of the stocks, most likely they were not recommended before and I bet they never mention their big losers. If it is that good consistently, why they leak out the secrets. Most of them make better money in the service than from their own trades.
Recently a 'guru' said he recommended not to buy silver before the big plunge. I read his recommendation a month ago. Guess what? He recommended silver full-heartedly and felt sorry for you if you did not have silver.
* When you have subscribed an investment newsletter, keep track of the performance. It is better to do paper trading before using real money.
* Compare your style of investing. If you're a day trader, most likely a newsletter for retirees and/or short-term swingers are not for you. Some newsletters concentrate on penny stocks that are quite risky.
* There are many sectors that we cannot evaluate effectively from the balance sheets. It is better to subscribe to these corresponding newsletters like drug, miners, bank lenders...
* Skip the inexpensive (or free) newsletters that concentrate on penny stocks. There is a good chance the editor trades before you.
* I do not evaluate using balance sheets any more as many newsletters/subscriptions have summarized many financial data for us to save us a lot of time.
(c) TonyP4 3/25/11
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Disclaimer: All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.
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