education and mentoring for your retirement





The R-I-I is not especially disposed to investment newsletters. Like money managers, some will have hot streaks only to be followed by periods of sub-par performance. Consistent, multi-year superior performance is extremely rare. Many newsletters do not have sufficient history on which to form a statistically meaningful judgment about their value. The recognized authority on accurately tracked and documented actual  newsletter performance is the Hulbert Financial Digest, available as a print publication since before the Internet was born!  The HFD measures recommendations’ results not on the basis of publication dates but rather on prices actually available when the recommendations were received by subscribers – a subtle but very meaningful difference! R-I-I strongly suggests that before subscribing to any newsletter or advisory service, an investor visit the HFD’s website, which is  Check out the letter’s record before you spend money even on a trial!

R-I-I especially cautions investors against subscribing to publications or following the advice of publications  that purport to be investment newsletters but which in fact are thinly disguised tout sheets. One key to look for is a small-print but lengthy paragraph in which the publisher discloses a complex web of interlocking companies, one of which has been paid a large sum of money (usually in six or seven figures!) to promote the specific stock featured in the free issue you have been mailed. Disclosures in such a case often include the fact that the publisher and/or members of management of the stock’s underlying company reserve the right to sell their stock “at any time”  -- which you should read as meaning “during the price strength that this recommendation will cause.” 

A typical and useful red flag in such company write-ups is that no balance sheet or income statement is included to help the prospective investor to become fully informed. Another red flag is that the “newsletter” makes multiple references to undocumented estimates of extremely large potential markets the company has just entered, or very high purported growth rates for the industry. High growth rates for company revenue are easy to project if it currently has virtually zero actual revenues. Yet another red flag in such write-ups is reference to the publisher’s past hot stock picks which produced “gains” of hundreds or thousands of percents. Such gains more often than not were measured from absolute bottoms at pennies per share, to higher prices driven by the concentrated but temporary buying of investors who received the newsletter itself!  Buyer beware is a highly worthwhile warning.