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Investment Newsletters: Outsourcing Fund Managers

Last week I asked whether investment newsletters were worth it [3] (the jury is still out), but when I talked to some people about it yesterday (the same co-worker), I had a revelation. When you sign up for an investment newsletter, what you’re actually doing is outsourcing the job of manager for your personal retirement or investment fund.

If it’s only $199 for the subscription to the Motley Fool’s Hidden Gem newsletter and you’re planning on putting $10,000 into it, you’re looking at an actively managed fund with a minimum expense ratio of 1.99%. Once you start adding in your own trading expenses, that numbers gets bigger, but essentially that’s your expense ratio (especially if you start trading with Zecco [4], thus taking out the buying and selling fees) if you want to compare it to some actively managed funds.

While it won’t compare to the low low expense ratios of an index fund but remember that you’re not really comparing your newsletter fund with an index fund, you’re (well, the newsletter is) actively managing its holdings.