How to choose the right newsletter for you.

After thirty nine years of selling subscriptions to thousands of market letters, we've made some observations on the subject. For example, investors rarely choose market letters exclusively on the basis of their performance in picking winning stocks. Unfortunately, most investors still choose their subscriptions on the promise of the market letter's promotion. Although you can't really judge a book by its cover, most of us still do just that. Yet, subscribing to the right market letter is vitally important in contributing to your investment success. Your market letter serves as a continuous generator of investment ideas. Even if you are not foolish enough to follow these ideas religiously, you are still influenced by them. If those ideas generally perform in superior fashion and if you know how to pick and choose from them wisely, your personal investment program is likely to be much more successful. On the other hand, if those investment ideas generally perform poorly, and if you are unable to pick wisely and work comfortably with the ideas, your investment program is sure to suffer. We think your investment success is likely to improve dramatically if you know better how to choose your market letter. That's what this article is about.

Know Thyself
Before determining whether or not a market letter has a good performance record on picking stocks, market timing or industry forecasting, you must first determine your real reasons for wanting to subscribe. You must be sure the publication will be useful to you. We think you will be better able to choose a truly useful market letter if you first answer the following questions.



What Types of Stocks and Investment Ideas are You Really Seeking?
Blue chip stocks of companies with large capitalization's, such as those generally recommended by the institutionally published letters...high beta, volatile, active stocks, or more stable, inactive stocks...low-priced stocks or even penny stocks...natural resource stocks...short-term trading ideas or long-term growth company ideas...undervalued stocks that might be considered potential takeover candidates...specific geographically located stocks, e.g. companies located in the area in which you live and work. Sunbelt stocks, California and Western stocks, Northwestern industries, etc...turnaround situations...market timing advice...speculative stocks...conservative, high-yielding investments. Despite promotions to the contrary, even "full service" market letters nevertheless concentrate on only one or two of these types of stocks. Value Line Investment Survey does not ever recommend penny or low priced stocks. What the Merrill Lynch Market Letter considers to be a "speculative" investment is considered a "conservative" investment by the Professional Tape Reader's standards.



Which Markets Do You Favor in Making Your Investments?
New York Stock Exchange, American Stock Exchange stocks, NASDAQ stocks, non-NASDAQ stocks, options, new issues, mutual funds, penny stock markets (e.g. Utah, Colorado and Canadian markets), foreign markets (Japanese penny stocks are very popular to some, hard assets (gold, silver, diamonds, colored gemstone, etc.). Again, despite claims to the contrary, most market letters favor only one or two of these markets. Make certain that the markets your market letter favors are the same that you favor.

• Investment Approach
As we advised before, first determine your own investment philosophy. Then, make sure the investment approach of the market letter you choose is compatible with your own.

• Variety Most investors subscribe to only one market letter. However, if you can afford it, we'd advise subscribing to several. If you have a broader array of investment ideas from which to choose, we think it's an advantage. Two market letters whose advice you respect might offer opposite advice on the same stock, a contradiction which would warn you away from a poor investment and might save you from losing money. On the other hand, a unanimous recommendation of one stock might offer you more reason to buy that stock. Also, the larger the number of investment ideas from which to choose, the better. Of course, the premise is that each market letter to which you subscribe is top notch. We would expect you to avoid subscribing to investment advisories whose advice would just confuse you by cluttering your flow of ideas.

• Clarity
If you can't understand a market letter, don't subscribe to it. Don't subscribe to market letters that talk over your head or that couch their recommendations with too many hedges.

• Consistency
The best market letters offer a consistent investment approach. If you are looking to a market letter for direction, avoid market letters that waver in investment approach. They will confuse you.

• Reputation
Seek out market letters whose writers possess a good, successful reputation. On the other hand, don't let big, flashy advertisements persuade you to subscribe to a market letter whose content turns you off. Also, once you get a feel for a market letter and you have good vibes from its content, try not to let a friend's opinion or a journalist's pronouncement dissuade you from subscribing. On occasion, a journalist is politically or philosophically opposed to a market letter you like...or is professionally jealous of that writer's success. If you detect the signs, be suspect of the journalist's advice. Here's where you must use lots of common sense in evaluating what you read or hear about regarding an investment publication.

• Size
Standard & Poor's Outlook, United Business Service, Value Line Investment Survey, Merrill Lynch Market Letter and other institutionally published letters are conservative in investment approach because of their large circulation. Their stock recommendations usually focus on widely held, large capitalization stocks because of the potentially harmful impact their recommendations might have on smaller capitalized stocks. Writing within stronger legal editorial constraints, institutional newsletters also tend to favor the "buy" side of stocks much more than they do the "sell" side. In contrast, some of the smaller circulation newsletters even recommend short selling as a matter of policy. Also, most large circulation newsletters tend to be more cautious in forecasting changes in stock market trends, while small circulation newsletters more often say exactly what the writer really thinks. Care, caution and conservatism are very important characteristics to most investors. On the other hand, if "conservatism" is not compatible with your particular investment philosophy, the large circulation newsletters are definitely not for you.

• Style
Analyze the market letter's features and format. Some newsletters offer selections on market timing, general stock market conditions; many do not offer these features. Some offer in-depth reports on recommended stocks, while others offer only very brief one or two line recommendations. Some offer commentary on interest rates, gold, silver, commodities, real estate and esoteric investment vehicles. Some feature one or many different updated portfolios of stocks for investors with different tastes, e.g. speculative, conservative, growth stocks, hard asset stocks, income and other types of portfolios. Most newsletters do not offer such a portfolio service. Market letters also publish at different frequencies. Many are published on a weekly basis; some are published semi-monthly, monthly, bi-monthly or quarterly. Some offer "hot-line" phone services with daily updated phone messages which subscribers may phone for current advice. The market letters sell at annual subscription prices ranging from as little as $18 to as high as $3000 or more. All these factors will influence your decision. Make sure the market letter you choose is published on the frequency schedule you feel is necessary, contains the features you need on which to base investment decisions, and sells at a subscription price you feel you can afford.

• Performance
There are a number of publications that now attempt to rank and rate market letters by their performance, i.e., how well or how poorly their stock recommendations perform relative to other market letters. Hulbert Financial Digest, SIE Performance Review Inc., Stock Market Performance Digest, Market Timing Digest, Rating the Stock Selectors, are just a few currently rating market letters. The information these rating services provide is quite helpful in choosing your market letter. Generally speaking, ratings of market letters on periods of less than one year are almost worthless. The longer the period of time over which the market letters are compared, the more meaningful the ratings are. Also, the more comprehensive the survey is, the more valuable the ratings will be. For example, a rating of 400 market letters is more revealing and of greater value than a rating of only 40 newsletters. All these rating services provide a valuable service by offering the prospective subscriber an objective means of determining a particular market letter's true performance record. Despite any controversy regarding the rating methodology employed by the rating services, their rating advice provides a superior means of objectively judging the true performance of the market letters you consider.

As you can see, there are many factors the prospective subscriber ought to consider in choosing a market letter. Our purpose was to bring together those factors in one article designed to help the reader better choose his sources of investment ideas. "Are there any more important factors we may have overlooked in writing this article?" you ask. Oh, yes. Good luck!