Does Paid Investing Advice Help? My Experience So Far with Subscription Investing Advice Services
This week, I am reviewing my finances. One of the tweaks I made to our financial systems last year was to subscribe to a paid investing advice newsletter. Since I don’t know all that much about investing or stock picking, I figured that receiving some specific advice from an investing expert would give me some concrete suggestions about what to invest in.
How did it work out for me?
Sadly, not so well.
There are a million different investing newsletters out there. All of them market themselves on the reputation of one or more seasoned stockpickers on the staff. They sound really impressive. The newsletters are generally written well and give you an investing recommendation along with the various reasons supporting the recommendation. There is usually some supporting economic data, stock data, industry trends or quotes from millionaire investors that makes the recommendation sound even more convincing.
The only problem is that the stock market isn’t a scientific problem to be solved. You can’t just follow a pattern of economic facts to stock market success. The investing newsletter I chose to follow last year ended up being “wrong” on just about every piece of advice they gave. It was written by intelligent people with a lot of experience and facts. The reasoning was a plausible guess about market conditions but the market went the other direction.
Fortunately, we did not blindly follow the advice and invest actual money. Instead, we were lazy. We read the recommendations but thought about it rather than acting on it. We made one investing decision based on the newsletter advice, which ended up being an OK decision but probably not the best one we could have made.
This year, I am trying another investing newsletter with a different perspective. So far, I can’t say I am really impressed. When I read the investment recommendations, I generally think, “Why that company? I never shop there.” or “If we hit economic difficulty, I don’t want to own that stock.”
After my experience so far with these investing newsletters, I have a few lessons learned:
1) There is no shortcut to investing success. Reading one newsletter is not a substitute for finding your own investments and developing your own investing method. The newsletter should supplement and not replace your other investing reading.
2) Patience is a virtue. If you choose an investing newsletter with a strong or unusual opinion, wait at least a few months to just read the advice, research and follow the market before acting on the guidance.
3) Watch for hidden agendas. Some of these investor newsletters seem to have an ulterior motive. Think about whether the investing newsletter is trying to boost a stock price so that it can profit while you lose. If your gut instinct says that something is a bad investment, it probably is.
4) Your eyes will be opened to the depth of the investing world. If you gain nothing else from an investing newsletter, you will at least learn about the millions of different types of investments out there. Portfolios are not just limited to stocks, bonds and CD’s. There are new and sophisticated types of investments that are accessible to anyone willing to learn how they work.
5) The investing advice world runs on paper. The two investing newsletters I subscribed to both provide their main newsletters via paper copy and snail mail. It seems completely backward and out of touch with the modern world but it ended up being a brilliant choice. We get so little via hard copy mail anymore that when the investing newsletter arrives, I find myself drawn to reading it. I also seem to comprehend more when I read it on paper than on a screen. Since there is an obvious time lag between the stock recommendation and the printing of the newsletter, it also provides an instant check for the long-term investor. Has the investment performed well since the recommendation was made? If not, it probably isn’t the investment for me.
6) Expect a lot and know how to cancel. There is so much free investing advice out there, if you are going to pay for advice, you want something that is easy-to-understand, relevant and that performs well. At the end of each subscription term, if you aren’t getting your money’s worth, be ready to switch and try something else.
Do you subscribe to paid investing or financial advice? What tips would you share about choosing a good investor service? Please share in the comments.