Many stock newsletter services look good when you read their marketing literature, claims on their websites, and print advertisements, especially when it comes to their performance claims. By knowing what to look for, you can keep from being disappointed. Below are six ways to evaluate your stock picking
One area to be concerned with is the period that an online stock newsletters performance claims covers. The historical results should cover years that have both bear and bull markets in them, as well as non-trending market periods, so you can examine how they profited in each type of scenario. Ideally, a stock newsletters performance outcome, whether only backtested or with real trading, should go back to at least the late 1990’s.
Do They Invest Their Own Money Into Their Newsletter’s Stock Picks?
Some online stock newsletter publishers invest in their stock picks with their own money, while others only publish paper traded model portfolios. Paper trading is the practice of using stock trade data based on a price that could have theoretically been received on a particular trading day (like a stock picks’ opening or closing price) and using that price data to represent what a stock could have been bought or sold at. Two important problems with paper-traded portfolios are that they do not at all times take slippage and commissions into account.
Review Past Trades
Stock picking newsletters are known for showing you pre-selected trade recommendations that outperformed the market in their marketing literature and on their websites – you’ve undoubtedly seen many of these ads yourself. As an experienced investor, you know to look past this blatant marketing hype, and to look at their complete trading history. Any credible online stock newsletter should offer this data to prospective subscribers. Also, be sure that they don’t only throw a bunch of individual trade data at you.
Many well-intentioned stock newsletter publishers begin as individual traders who have purchased historical stock data (fundamental and technical), and then created a trading system that works very well … Read the rest...