With the internet such a huge part of our daily lives, many
investors have access to a wide range of instant investment
information.
Whether you’re into stocks, bonds, mutual funds, futures or
options, there are tons of electronic investment newsletters
offering to turn your small stake into a giant fortune. All
you need to do is subscribe and watch your portfolio soar.
Yeah, right!
As a practicing investment advisor specializing in no load
mutual funds, I have received my share of e-mails from
disillusioned subscribers wanting to know how to better
evaluate newsletter services.
While there are no absolutes, I can give you a few pointers
that might help you make a better decision:
1. Stay away from the most obvious hype. Ads promising to turn
your $10,000 into $1 million in 2 years by buying this
incredible stock or hot commodity are not promoting investing
— they are selling gambling. Follow the "If it sounds too
good to be true, it usually is" rule.
2. Most mutual fund newsletters won’t make those outlandish
claims, but some of them are still pushing the truth as far
as they can. So try to get a free issue or two to examine.
If you can't get a sample, check if they have a trial period?
How about a money back guarantee? If not, pay with your
credit card. These days you’re pretty well protected by
this payment method even if the newsletter doesn't offer
a satisfaction guarantee.
3. Consider the editor as well as the disclaimer notes. Is he
or she only publishing a newsletter? Or is he also an
investment advisor with a practice?
Why would that last point matter? I may be biased, but I
believe that you get far better advice from a writer who
also is in the trenches every day investing their own as
well as their clients’ portfolios. They would have far
better insights as to what works and what doesn’t than
someone who has the theory down but no practical experience.
4. Look at the investment recommendations. Are they suggesting
you buy into a certain orientation such as mid cap, small
cap or large value? Or are they picking specific investments
based on a variety of technical indicators?
In my no-load mutual fund practice I use specific
recommendations, even for my free newsletter subscribers.
They are first based on my trend tracking indicator giving
us the green light and secondarily on the selection of
mutual funds based on momentum analysis.
The more specific the recommendations, the better, because
that allows you to follow along either just on paper (which
you should do at first) or with your actual portfolio.
5. Are they recommending when to sell a mutual fund either
because of gains or to limit your losses? This to me is the
most important issue. If there is no plan in place for
getting out, how will you ever know when to sell? This has
been the greatest downfall of most publishers (and investors!)
since the bear market of 2000 — not selling even if market
conditions dictate it would be in your best interest to do
so.
The advice of most newsletter services can make you money in bull
markets. However, with the continuation of the bear market still
a distinct possibility, be sure to look at any newsletter's
investment advice record since 2000.
For many people investing is an emotional issue. The pendulum
swings between fear of loss and greed for greater returns. If
a complete methodology for buying and selling is offered in a
newsletter, such as one I advocate, be sure that it fits your
emotional make up.
There is no sense in following an investment approach, which
may have merits, if it means sleepless nights for you. You
won’t stick with it for the long term — and long-term investing
is essential for making your portfolio grow and prosper.
So, the bottom line is to look for a newsletter that:
* does not promise the moon,
* has a track record through up and down markets, and
* recommends an approach that not only is compatible for
your investment style but also has an exit strategy so
you can capitalize on your gains -- in the bank, not
only on paper.
Following these guidelines may not make you rich, but it will
help you avoid some bad advice.
Copyright 2004, Ulli G. Niemann
Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped countless people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit:
http://www.successful-investment.com
