Why newsletter services are like professional traders

Discussion in 'Trading' started by garfangle, Apr 20, 2010.

  1. You and I have seen their advertisements: "Just $99/mo. for select picks of hot stocks. Along with my commentary get an exclusive daily trading idea."

    I have always wondered why investment newsletter services and their web-based brethren need subscriber revenue to make a living. If their picks were so hot, why could they not get rich just by following their own advice? Surely, if your forecasts were correct you'd be able to compound your returns and become a multimillionaire easily.

    I now realize that newsletter writers are not so different from professional (paid) traders. Both types use Other People's Money in order to earn a living.

    That is they both make prognostications about the future direction of the market and earn a fee (subscriptions v. salary) whether or not their forecasts come true or not. The only real difference is that professional traders exert control over the investments and execute the trades.

    If their advice turns out to be accurate they are celebrated and get more business or earn a bonus and if it turns out to be wrong, their subscribers depart or they get fired. While that outcome is unfortunate, the investment losses are borne by Others. Moreover, they can always restart anew or get a new job and chalk up their lousy advice to market volatility.

    The reason why amateur traders fail and newsletter writers and professional traders succeed is not because they are necessarily more skillful or wise, it is because they employ OPM. Classic head I win, tails you lose. All profits are shared with the advisor, but all losses are solely borne by the investor.
  2. Yup. Newsletter income has minimal risk. If you are wrong consistently, it will fall, maybe even to zero, but it will not go negative.
  3. Lethn


    We really need a site that isn't full of scam artists and advertisers to chat on as traders I think.
  4. Start in a bull market. Find sectors moving up. Pick industries in vogue. Draw weekly charts with trend lines under stocks in these industries moving up. Buy a mailing list from the 10,000 mail vendors. Hype your $99 product to 10,000 investors using standard jargon. Hit rate should be 1 or 2% giving you $10,000 to $20,000 revenue in the first year. And then write, write, and write while sending out to the next 10,000 investors.

    By the end of the first year unless you picked horribly a quarter your newsletter investors will sell you another $5,000 of subscribers. Then repeat and repeat selling hopes and dreams. If your picks are good you may be one of the 1 in 20 newsletters to to go on to be in the super news letters.

    Personally I would rather stick my head in the toilet all day than force my self to write such BS. It may have minimal risk but it is a pain in the ass to run this type of marketing organization. All it takes is one black swan market event and your good name would be dragged through the streets through the mud. If you decide to do this use a pseudo name like Jim Cramer….