Let’s imagine the easiest way to make a bunch of money for providing virtually no actual value, having very little accountability, and having the capability to scale your scam as much as you could ever imagine. Here are a few common “business ventures” that come to mind:
a) Virtually any of the top selling affiliate programs and ebooks you see on numerous blogs. You know, the “make money online” genre, “natural” remedies and cures, diet solutions and workout programs. Why would so many blogs promote the virtues of ebooks and programs that are worthless? Well, that’s what affiliate marketing is all about! The crappier the program, the more they charge for it and then give an ever-increasing cut to bloggers for each sale! Often upwards of 50%. Many bloggers don’t really think twice about promoting horribly useless and often, harmful advice for lucrative payouts like that! Why do you think those reviews are so convincing?!
b) Multi-level marketing of pretty much any sort. MLM is one of the most vile “business” ventures in existence. You basically convince other suckers in your downline to be scammed into the same useless system you were just scammed into so you can leach off their exploits as well. At the end of the day, the goods and services sold through MLMs are invariably overpriced, useless and misleading and a few people at the top get rich. Within months, the vast majority of all the “suckers” realize they’ve been suckered, they’ve run out of other suckers to recruit, and they quit with loads of time wasted and dollars spent. Usually, they don’t talk about their lousy experience because they feel so ashamed for enthusiastically promoting something within their social circles and family members only to bail after such a short period.
c) Investment newsletters. Really?
Investment Newsletters: As Useless As FREE Investment Advice, But You Get to Pay for It
Here’s the thing about investment newsletters that makes them so appealing – incredible claims! This newsletter “predicted the market crash” and that one “beat the market”; meanwhile, this one’s written by a “market guru”. It’s all nonsense (generally, save for probably 1-2% of older more established and respected newsletters with proven track records and advice). Here are some key reasons newsletters aren’t worth the time or money:
- Absolutely no Accountability – When’s the last time you’ve heard of the SEC prosecuting newsletter peddlers for making false claims? They have their hands full with more politically sensitive cases like Ponzi schemes and Insider Trading. I couldn’t help but notice a great piece in the Wall Street Journal this week about a “celebrity-endorsed” newsletter. As if Suze Orman didn’t have her hands full pedaling a widely criticized card (and then calling personal finance bloggers “idiots” for criticizing it), now I’ll be looking forward to her defense of this newsletter report. Since bloggers in my circle have recently been the targets of lawsuits from high profile celebrities for simply repeating something reported at larger, legitimate news sources, I’ll just let you read about it at wsj.com and form your own conclusions. Just consider whether this newsletter met its claims.
- Genius…Just Genius. Here’s a really ingenious way to get around worrying about performance and accountability. Let’s say you’re a newsletter peddler and you want to tout your best and brightest investment performance and sweep your losers under the rug. Here’s a classic. You issue several different newsletters over some period of time, say the last year. Out of the ten different newsletters with whatever circulation you chose (perhaps zero), as long as you were issuing the newsletters and have proof (timestamps, cached in google or whatever), your newsletters are legit, right? Well, let’s say 8 of the 10 underperformed the market, 1 tied it and 1 greatly exceeded last year’s market returns. While this may have been due to sheer luck (random probability actually, since I don’t believe in “luck”), you can legitimately ignore the 9 and promote the 1. Here’s a common claim, “The Tiger Newsletter beat the S&P500 by 12% last year! Subscribe now for just $39 per month!”. So, all you’re really buying is last year’s performance history in what was arguably just random probability. This one newsletter is no more likely to outperform the market THIS year than the 9 that didn’t that aren’t be promoted. But legally, this newsletter peddler is totally within their right to promote this one newsletter. After all, they have the performance and the timestamps to prove it! They just conveniently don’t promote the losers. It’s quite a lucrative and innovative proposition!
- If They Were REALLY This Good…Here’s the most obvious one that people seldom ask themselves when paying for “exclusive” advice. Given the ability to use leverage, the power of compound returns and the infinite universe of investment options, if a given individual were SOOOOO gifted at picking stocks, why on earth would they share this priceless advice where they could be making millions running their own hedge fund or investing for other big-money investors (or themselves) rather than peddling $29 newsletters? I find this to be especially obvious with some of the broadly advertised radio spots and CNBC ads on satellite radio. You know, that “trader that made millions during the market crash”? So, why wouldn’t he just keep making millions more, tens of millions more, in future years with such foolproof advice himself instead of making probably a few hundred grand, max, selling these “stock market secrets”? It just completely defies logic.
- You Can Get Plenty of Similar Advice for FREE – If you’re considering a paid newsletter that focuses on data, advice, ideas and whatnot, chances are you can get that sort of information for free. Why? Given the thousands of finance and investing blogs sprouting up daily, it’s a virtual race to the bottom. Bloggers who once enjoyed pricing leverage years ago are now finding themselves in a sea of thousands of other similarly-themed outlets and have to resort to either the “freemium” model, or just outright writing good, useful commentary and using their blog to either make money with ads or promote their books or services. But the net delivery to the reader is free. So why pay?
Am I A Hypocrite?
You might question the notion of a personal finance and investing blogger trashing newsletters. Well, if you check out my portfolio updates, even when I beat the market (which I often did during last year’s reports), I always made it a point to highlight why – not because of my prescient skills and stock-picking abilities, but because I was holding high Beta stocks in an up market. I also highlighted my WORST Trades. And finally, I’m not selling you this information. I make it clear that I’m not a registered investment professional, but I blog and invest as a side-gig hobby and not a profession.
Is an Investment Newsletter EVER Worth It?
Surely, there are some good pieces of advice to be gleamed from some newsletters which may well inform how you want to invest in 2012. General market commentary and news is worth something, right? I mean, we pay for newspaper and magazine subscriptions after all. But we know what we’re getting there – news, commentary and ideas. Not a portfolio selection that is sure to beat the market. Sometimes, a technical analysis service may have some promise, but those services could also be prone to all the same problems cited above. And then, there’s always the FREE newsletter. As long as it’s really free and doesn’t require some sort of subscription after a free trial and it isn’t loaded with affiliate products they’re looking to sell you, how could you say “free” isn’t worth it? By its very virtue, it has no cost, so I suppose it’s tough to argue it “wasn’t worth it”. I have only subscribed to a handful of free newsletters in my lifetime and of those, I found a couple to be mildly useful just from an “idea” standpoint. I never put much stock in actually following trade recommendations verbatim…since I’m a skeptic.
Do You Have Any Experience With Paid Investment Newsletters?