Investment newsletters and other bits of what I'll refer to as premium content really sound great in the advertising and marketing materials that you receive. In these advertisements there's generally very little information about how specifically these products work. Some of these products are really good and you should consider purchasing them and arming yourself in the quest for higher investment returns.
I was first introduced to investment newsletters about 15 years ago and used it to purchase a couple of stocks that I had a fantasic return on. I had no idea what a Canadian Oil Trust was, but the dividends were fantastic and the price of the two that I ended up purchasing nearly doubled. I was hooked on this one, and honestly I don't remember what it was called but it was published by Stephen Leeb. The newsletter that he wrote back then was different from the one he publishes today (The Complete Investor).
Fast forward a few years (to 2007 a few hours before the stock market melted down) and I became the SVP of Operations for theStreet.com. In all honesty I had no idea who Jim Cramer was at the time and in all honesty I didn't care, I needed a job. Over the next 5 years I learned an enormous amount about this business and grew to understand some of the good things and bad things relating to these products, particularly how they could or couldn't work for someone like me who really wasn't terribly active in the market. I decided to put this section together to help people understand the wild advertising of '650% Returns' or 'the next Amazon' to give you a better understanding of what you're getting and how best to use them and most importantly whether or not they are worth the money.
Over the next few weeks we will be looking at and reviewing as many of the investment newsletters that we can and will give you our ratings on each, comments as to how you can and should use them but most importantly, we will be looking for the best investment newsletters out there.
During my time at TheStreet and from being a customer of Dr. Leeb I really do find great value in some of these products -- with the caveat that you really have to understand how best to use them.
I'll start things off with a little bit of information as to how these products typically work. There are a number of great things that you get right off the bat which is commentary about what's happening in the markets. This is pretty typical of the majority of products that I have had experience with. If you have similar thinking as the people that put the content together it can be really excellent insight as to what's happening and can provide a perspective that you may not have come up with. I found this to be particularly interesting when I started using these products since I didn't understand all that much about the markets, but wanted to understand things, not just follow someone's directive. This is one of the key features that you should look for, unless of course you just want recommendations to act on. If you want to learn as you get your advice, this is a really important aspect of any investment product.
Some of the premium products have what's known as a model portfolio associated with them. With this portfolio, there are different investments used to illustrate a specific investment strategy. This can be a bit of a double-edged sword since most people don't buy into one of these products at the onset so you have to do some work to figure out what you should think about buying/selling/etc. If you need and want an example of what to do, look for this. What I would add and recommend is that you look for a portfolio roughly the size of the investable assets that you currently have. If you don't have $2 million to invest like a pro, then you might want to consider something that doesn't require that much, OR just buy and sell on a pro-rated basis.
Another feature of some of these products is just a list of recommended investments (stocks, etfs, etc). These lists provide information regarding when and why it was recommended, what the current perspective is on the investment and an imputed gain or loss based on the initial recommendation. If the product does not provide an updated perspective, you should do some additional research prior to any action with things that are on the recommended list before you buy/sell. This is sometimes a good alternative to the model portfolio and can be a little easier to understand.
If you're more of a do-it-yourselfer you'll likely want to look at and use a premium stock (or other investment) screening application. There are some really excellent ones out there like one from Zack's and theStreet's Quant Ratings. If you're okay with the free information that's available from web sites like YahooFinance or GoogleFinance, then don't spend the money, but the premium ones typically have some analytical ratings and a lot of additional information that you can search and screen on to help you think through your decisions.
The last feature that I've seen in some of these products, like TheStreet's Real Money is an blog area where there are notes and messages from active and knowledgable traders. These posts can give up to the minute commentary about their view on the market and what they are currently looking at and thinking about. This can be a really great learning tool, particularly if you can interact with them, although that is likely an expensive feature.
In this series, we will put together our Best Investment Newsletter and Best Investment Product lists and let you know the benefits and/or drawbacks of each of the products, information as to how they work when we review each of them. Stay tuned.