Beware False Claims

I thought that I should warn anyone reading this blog about the practice of a lot of these financial newsletters that try to get you to pay for advice. I have looked at many of them and they claim growth ranging from 300% above the Dow to 3000%. When you examine them by some miracle they always bought each stock at its historic low thus giving enormous gains. But a closer examination often shows that what is really happening here is that they are being parsimonious with the exact nature of when they recommended...many doing this in hindsight.

This is a good game anyone can play. Choose ten stocks by looking at their historic low points, put them into a "fund" and then show the growth to today. Obviously there are many excellent services out there, but there are also many not being totally truthful on their results, so just beware. Another favorite game is having one or two stocks in the fund that were bought at historic lows thus skewing the results of the later failures and delivering an overall apparent winning set of choices. Watch out for newsletters that self promote the author a lot, hinting that he or she advises top investors, or appears on TV, or works with billionaires but is now letting you in on the secrets.

My only advice is that when I started investing I bought a lot of newsletters and I did not get rich in fact I lost a lot of money. One thing to keep in mind is that the author may be a wizard in some specific area such as energy or technology, but that does not mean he understands the great rises and swells of the market. This results in recommendations that this or that company is going to rise...but then it doesn't because the market dropped 5%.... its hard to find someone who looks at this challenge from both a macro and micro viewpoint, who understands the market forces that swirl around small investors. For example company A looks good, its got all the boxes ticked...but billionaire investor Y has decided his hedge fund is going to short it into the ground and them pick up the pieces when everyone panics. Small investors usually sell quickly when shares drop a lot. Result unhappiness....been there, done that. Wouldn't recommend it at all!