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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:
1. does not promise the moon,
2. has a track record through up and down markets,
and
3. 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.
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