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Are Investing & Retirement Newsletters Worth It?

Posted By Jim On 01/21/2013 @ 7:15 am In Personal Finance | 4 Comments

For years, my retirement portfolios have been on autopilot. I set the allocation, rebalanced every year, and just let time work its magic for me. I didn’t do much in the way of analyzing investments because when you’re just starting out, the time it takes to do all that reading won’t translate into significant gains because your war chest is so small. We’re getting to the point where our investment portfolios are large enough that spending some time on research can pay off. That’s why you’ve been seeing some posts about dividend stocks [3] and even that one about Forex investing [4] (you have to research it to find out if it’s for you… Forex is not for me).

I separate the world of investing and retirement newsletters into two categories:

  • Stock picking: The newsletters are designed to give you clairvoyant stock picks destined to make you boatloads of money… that’s why you pay around $100, on average, a year.
  • Personal finance: These newsletters aren’t in the business of picking stocks, they’re in the business of educating you on how to be a better investor.

Strategy is Paramount, Success Needs Luck

My opinion is that no one can see the future but some people have developed an approach to investing that simply works. It may not be right every time, but in aggregate it’s right enough of the time to be worth reading. It’s a lot like another business that is all about statistics – baseball. Alex Rodriguez has a lifetime batting average of 0.305 – meaning he only got on base a third of the time.

While regarded as one of the best of the best, from Game 4 of the 2004 AL Championship Series to the first game of the 2009 Post Season, A-Rod was 0-for-29 over 61 post season at-bats with runners on base. That’s bad. But in the first game of the 2009 AL Division Series, he knocked in two run singles when there were two outs. That’s good. In the 2012 postseason, he hit 3 for 25. That’s bad.

These types of newsletters are like that. They can have long stretches of good performance followed by a stinker, which isn’t hard to believe since everything was a stinker the last year.

Understand the Strategy, Not the Picks

If a newsletter has a proven track record of strong performance, look for the secret sauce. If the newsletter staff is good at crunching numbers and doing some of the analytical legwork for you, then that’s worth paying $100 a year. If they’re good at screening stocks or researching international companies, that’s information you would gladly pay over doing yourself. If they have excellent knowledge of a particular industry or market, again that’s information you will want.

If they’re just randomly picking stocks, offering little in the way of methodology or reasoning, run the other way. They might get it right a few times but they have no technique. They have no repeatable protocol for finding the next pick. Or the one after. Your investment approach should be similar.

My Strategy

My strategy has been to stick with index funds and then play a little with dividend stocks with companies I like. The index funds approach is easy and unassailable, I get that I only get market returns. I’m OK with that. The dividend stock part is where I can stretch my analytical legs and have some “fun.” I avoid gambles like the Facebook IPO.

I don’t subscribe to any investing or retirement newsletters but I have read them before and they are interesting. It’s always good to read other viewpoints and analysis to see if you’re missing anything or if you need to dig a little deeper in another area. You can always learn something and you never know when you might need it.

Personally, I think they’re worth it from an informational perspective but I wouldn’t subscribe to one with the idea that it’ll show me the way forward. Heck, my favorite investing site is run by a guy who sets his buy list of 20 stocks [5] at the beginning of the year, never changes it, and only swaps out five stocks. He’s beaten the market since 2007. He posts daily, it’s free, and you can learn a lot just by reading.

(Photo: justLuc [6])


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[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/investing-retirement-newsletters-worth.html

[3] dividend stocks: http://www.bargaineering.com/articles/why-dividends-stocks-rock.html

[4] Forex investing: http://www.bargaineering.com/articles/introduction-to-forex-investing.html

[5] buy list of 20 stocks: http://www.crossingwallstreet.com/buylist

[6] justLuc: http://www.flickr.com/photos/9619972@N08/2781329487/sizes/l/

Thank you for reading!