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Article Index
Introduction: What kind of Services will you need?
How much will this cost?
Does the cost of an advisory service determine the quality?
6 of Our Favorite Advisory Services
Choosing an Investment Research Site
Inexpensive news and investing education material
Conclusion
Our other guides
What kind of services will you need?
We believe the most effective combination for all investors, not just beginners, is an advisory service, an investing research site, and some combination of news and education material. The advisory and investing research site are paid services, but most of your news and educational material, like our Money-and-Investing.com site, is available for free.
Why does this combination work best?
The benefit of the advisory service is that you will always have access to buy/sell recommendations when you’re looking for ideas and you’ll be provided model portfolios that are in line with your strategy. The reason you’ll want the second service, an investment research site, is that it gives you the ability to validate any investment advice that you’re ever given. Finally, the supplemental news and educational material provides continued education (never stop learning) and keeps you current with market and economic trends.
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How much will this cost? Stock Investing Advice
If an advisor or advisory service ever waffles when you ask this question, run. It’s a fair and important question, and anyone that balks when the cost is questioned is probably overpriced. For a high quality advisory service and an investing research site you need to be willing to spend about $200 on each or $400 total per YEAR. We’ll go ahead and warn you now that as you start researching you will get some incredible sales pitches from advisors that charge this much PER MONTH. This is especially true of local Financial Planners and local Brokers, so next we want to explain why “you get what you pay for” doesn’t apply when it comes to investing advice.
Stick to your budget, don’t let a sales pitch convince you to spend thousands per year. Local financial planners, local brokers, and advertisement spamming advisory services often charge an arm and a leg for their services. They charge anywhere from a few hundred to several thousand per month to manage your money. How do they justify their expense (and existence)? They claim that their fees are a small price to pay for the outstanding investment advice, personal attention, and in-depth research they are providing.
Are you kidding me? You’re not buying a custom suit! Good investors should be focused on returns, paying all of these extra fees for great service cuts a big chunk out of your profit. This sounds like obvious and absurd advice when you read it here, but you’d be surprised how many people get duped into expensive advisory services and fee-laden Financial Planner and Broker services based on a good sales pitch.
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So how can the $200 per year advisory services afford to give their service away so cheaply?
Simple, economies of scale. The more customers an advisory service has the cheaper it is able to offer its services.
This concept is easiest to explain with an example. Let’s compare a talented financial planner that specializes in growth stocks to an investment advisory service such as The Prudent Speculator. If you are a Growth Investor, both of these services seem to be appealing options, they both provide great recommendations in line with your strategy. As long as the financial planner is willing to give you his last 10 years worth of recommendations and some references, he is able to validate his performance. The Prudent Speculator has been tracked by independent rating agencies for over 25 years, so they are able to prove that they are also a long-term market beater. That’s where the similarity ends.
The Financial Planner has to manage your money, they will track your portfolio and handle all of the buying and selling personally. This means that they can manage about 200 clients, any more than that and they are stretched pretty thin. If this financial planner wants to make $150,000 per year, he will have to charge $750 in fees per customer per year. Will a planner really charge you $750 per year, is this realistic? Yes, in fact most planners will charge you more since their expense is usually a percent of total assets and you will pay their fee even if your portfolio loses money.
For example, if you have a $150,000 portfolio and your advisor's fee is 1% of total assets, you will pay $1,500 this year. The Prudent Speculator, on the other hand, only makes recommendations and they only manage their own money, so the only buying and selling they have to do is within their own model portfolios. They add zero incremental expense when they take on additional customers. The more customers they have the more cheaply they can offer their service. That is why their service only costs $195 per year.
If you, the beginner, made a $15,000 profit this year but you have to pay the financial planner $750 you just gave up 5% of your profit. If you subscribed to The Prudent Speculator you received the same recommendations but only gave up 1% of your profit. Here’s the icing on the cake… the editor of The Prudent Speculator, John Buckingham, and other newsletter advisors like him, have proven track records, they are some of the best investors in the world. Not many local financial planners are going to be able to compete with this kind of talent so you actually get much more for your $195 than you would from the $750 as far as returns are concerned.
Unfortunately, you still face an overwhelming number of high-quality and affordable advisory services. Here’s a list of a few of our favorites spread over a broad variety of strategies to help you narrow down your choice.
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Investing Advisory services that provide specific buy/sell recommendations and model portfolios:
The Prudent Speculator
Cost: $195 per year
Editor: John Buckingham
Portfolio: Mostly Stocks
Strategy: Growth Investor
Description: We talk about them a lot so we wanted to point out that we don’t receive any compensation from or have any relationship with The Prudent Speculator, we just have a great deal of respect for anyone that can crush the market returns for over 25 years and counting. This seasoned investing team is led by Al Frank’s protégé and successor, John Buckingham. They Provide strategy analysis and explanations, clear and easy to follow buy/sell instructions, and model portfolios.
Fund Street
Cost: $149 per year
Editor: Jay Baxter of Money-and-Investing.com
Portfolio: Index Funds and ETFs
Strategy: Index Investor
Description: Index Investing is our favorite strategy, feel free to read our Index Investing Strategy Review or Complete Guide to Index Investing if you’re interested in learning more, both of these guides are free. Fund Street is a great choice for those looking for a low maintenance portfolio. There are three model portfolios that provide a different mix of Index Funds and ETFs to meet the objectives of Aggressive, Balanced or Conservative Investors. Index Investing requires very little trading so this is the most cost- and tax-efficient newsletter strategy available for those trading in taxable accounts. Fund Street is a proven market beater that provides strategy analysis and explanations, clear and easy to follow buy/sell instructions, and model portfolios.
The Buyback Letter
Cost: $195 per year
Editor: David Fried
Portfolio: Stocks
Strategy: Income Investor
Description: We are not recommending all of David’s portfolios, we only recommend his Buyback Income Index Portfolio. David focuses on companies that are buying back their own stock. The theory is that this disrupts the natural balance between supply and demand because companies are eliminating some of the supply when they remove part of their stock from the open market. We don’t know much about buyback theory but based on David’s results, this is a winner. The Buyback Income Index’s performance is very strong on a risk-adjusted basis. While the intent is to produce income and preserve capital, the portfolio has also produced very nice growth, which is an important factor for conservative investors that want to stay ahead of inflation. The Buyback Letter provides strategy analysis and explanations, clear and easy to follow buy/sell instructions, and model portfolios.
No Load FundX
Cost: $149 per year
Editor: Janet Brown
Portfolio: Mutual Funds
Strategy: Momentum Investor
Description: We don’t recommend all of Janet’s recommendations, only her Class 3 portfolio. While we consider her a Momentum Investor, Janet calls her investing style Upgrading. Regardless of what you want to call the strategy, Janet has had spectacular results. She crushes the average market return not to mention the returns of all but a handful of her growth and momentum investing peers. Most astonishing is that Janet’s entire portfolio is comprised of Mutual Funds rather than stocks. She uses a momentum scoring model to rank fund performance and “upgrading” refers to the practice of constantly moving your money into the highest ranking funds. No Load Fund X provides strategy analysis and explanations, clear and easy to follow buy/sell instructions, and model portfolios.
Equity Fund Outlook
Cost: $149 per year
Editor: Thurman Smith
Portfolio: Mutual Funds
Strategy: Mutual Fund Investor
Description: This proven market beating newsletter is edited by renowned fund expert Thurman Smith. Equity Fund Outlook tracks two Model Portfolios, one for taxable accounts and one for tax deferred accounts and we are comfortable recommending both. Thurman’s fund selection model takes a lot into account, but the primary criteria is his Investment Skill Quotient. This calculation divides the growth potential by the risk exposure to estimate how effectively a fund is managed. Since Thurman’s newsletter has beaten the market soundly for the last 15 years, we believe his calculation is a pretty good performance indicator. Equity Fund Outlook provides strategy analysis and explanations, clear and easy to follow buy/sell instructions, and model portfolios.
Global Investing
Cost: $180 per year if you subscribe for two years
Editor: Vivian Lewis
Portfolio: Stocks, heavy international emphasis
Strategy: Value Investor
Description: We are not recommending all of Vivian’s recommendations, we only recommend her Buy-and-Hold Portfolio. This model portfolio focuses on international value stocks with an emphasis on wealth preservation and current income. Vivian has been working in the international investing arena since 1966. She graduated magnum cum laude from Harvard and speaks 6 languages. We don’t usually care about pedigree since 4 out of 5 Harvard MBA Fund Managers fail to beat the market each year, but Vivian has always taken a common sense approach to investing. She travels the world to meet the management of potential investments and she follows that up with exhaustive fundamental analysis before buying. Not only have the returns of her international Buy and Hold portfolio beaten the major indices for over a decade, Vivian has the best risk adjusted returns of any Value Investor in the business.
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Choosing an Investment Research Site
After you have selected an Investment Advisory Service, the second expense you’ll need to consider is an Investment Research Site. We applaud the ambitious beginners that are already thinking of taking this important step. Hopefully you’d prefer to at least validate the recommendations you’re getting from your advisory services. You need to select a subscription to a site that will provide robust data and investing analysis tools.
Since all investing research sites are different and can be tough for the newbie, we’re only going to recommend our favorite and most user-friendly, Morningstar.com. They have a great variety of free investing tools, so check out the free stuff before you sign up for the paid service. Even if you decide to buy, the subscription is only $16.95 per month and it includes exceptional tools for screening, researching, and selecting stocks and funds. If you want to learn more, read our Morningstar.com, the Power of Institutional Investors at your Fingertips guide.
A final note on research sites
We don’t recommend this approach, but… if you don’t plan on doing much of your own research and analysis, don’t join a pay site. In-depth research and analysis services are wasted on the casual investor that simply buys the stocks, bonds and funds that his advisory service recommends. This type of investor will generally only need to look up quotes, charts, financial results, news and other basic information. If this is you, invest your money at any of the major online brokerages, they will have all the tools the casual investor will ever need.
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News and Educational Material: Free Web Sites, Books, and Magazines
You will want to keep up with the market and the economy, continue to learn, and get some personal finance advice to provide balance to your investing education. Most of this information can be found for free on the internet (at sites like this one) or for less than $20 at your local bookstore.
We can also recommend a few great books. Check out our reviews of The Richest Man in Babylon, The Millionaire Next Door, and The Essays of Warren Buffett : Lessons for Corporate America. These are three of the best investing and personal finance books you’ll ever read. Be sure to check for used copies on Amazon.com or Ebay before you pay retail.
Another fun and cheap way to keep up with the market and continue to learn about investing is through magazine subscriptions, many of the best available cost less than $20 per year.
A 12 month subscription to Smart Money published by the Wall Street Journal only costs $14.99 per year. This magazine contains outstanding content similar to the journal with a little more emphasis on personal finance articles than the Journal.
Kiplinger’s Personal Finance costs $19.99 per year. Despite the title, this magazine focuses on both the market and personal finance. Great content plus a lot of educational material.
Money Magazine costs $14.99 per year. This magazine contains a little something for everyone, you can always count on each issue to emphasize a different aspect of personal finance and investing. Like Money-and-Investing.com, they shun the ivory tower mentality. Their publication is a fun and easy read and it always provides a lot of high quality educational content.
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Conclusion
Several of the top performing newsletters in the world cost less than $200 per year while many of the worst performers that haven’t beaten the S&P or even turned a profit cost thousands of dollars per year. Hopefully this article armed you with enough information to avoid being fooled into thinking that the price of an investment service determines the quality of the advice. Buy high quality and affordable investment advice from people with a lot of experience and a proven track record. Then use knowledge gained from Money-and-Investing.com and an investment research site like Morningstar.com to validate every investment recommendation before you buy.
Thanks for reading! Please feel free to browse any of our other free guides and be sure to come back to visit us again soon, we are constantly adding new content.
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