Investment Newsletter

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Category: Investment Type

There are quite a variety of investment newsletters, available to investors today. Unfortunately, few investment newsletters, or any hot pick type service, deal with what it really takes to become a successful investor. You can subscribe to the "best" investment newsletters on the market, but the simple fact is that, at the end of the day, most investment newsletter subscribers will fail to match the newsletter's model portfolios. On paper, many investment newsletters tracked have a great long-term track record. The reality, however, is that these high-ROI investment newsletters have generally not translated well for most investors subscribing to them. Often, the tendency is to blame the newsletter, but it has been my observation that the fault lies elsewhere. It is this exact pessimism that motivates millions of investors to panic-sell their positions, and it is very common for most investors to freeze at this juncture of the market, and thus never become fully invested at the best possible time.

Let's face it: if to become a successful investor, all it took was to subscribe to an investment newsletter, then the word would spread rapidly, and that one investment newsletter would have more customers than any other entity on Wall Street. The reality however, is that there has never been such a success. Why? Because in the final analysis, 9 out of 10 investors fail due to two simple reasons: Position Sizing, Investing emotionally, instead of mechanically. The majority of investors who sign up to popular investment newsletters are extremely naive. In their minds, the process is as simple as, "Just give me your recommendations and let me become as successful as you are." In addition, the majority of investment newsletters' recommendations tend to be triggered at times of extreme pessimism, as the market is selling off for one reason or another, which means stocks are falling to desired investment newsletter buy targets.

Unfortunately, as any money manager knows, entry points account for very little in the overall success of a portfolio.  Following a successful investment newsletter's recommendations is pointless, when Position Sizing is not part of the equation. We all know that Warren Buffet is a value player, but so are millions of other smart value investors, so why are they not as successful? The most interesting aspect of any investment newsletter's model portfolio is the fact that the overall ROI is notably improved by the strong performance of a few great-performing, high-volatility stocks. Unfortunately, in a real portfolio with real money at stake, instead of diversifying amongst all the recommended stocks in the model portfolio, investment newsletter subscribers often pick and choose only those stocks that they view as safe bets, or having the greatest potential, and therefore cause their actual returns in a real portfolio to be far lower than what a model portfolio portrays.