This post was inspired by investors who tell me they use a newsletter to pick stocks, that diversification is for losers, and it’s easy to beat the market. Here’s a case study in what happens when you follow financial newsletters sent straight to your front door.
Biotech returns from heaven are here!
Imagine your future self once you make 600% returns. The new home. Car. Respect. Status. You’ll be first class in a freshly tailored tuxedo with a James Bond ordered martini in hand. You’ve arrived. You are David. You have heroically conquered the market, and Goliath has fallen. Victory is yours…
All from this “trusted” newsletter:
I read this newsletter on 2/1/2018:
Let’s admit it. Just between us, the above newsletter is tempting you to buy GTBP like it’s the smartest decision you might miss in your entire life. Sometimes I envision investors reading a newsletter like this. Sweaty palms, heart fluttering, and a sense they can get an edge. Someone somewhere always knows something, some say, so it’s my time they think.
They think through calling me. No way. What would he say if I did? So they play out the conversation in their head. Wait, I’ll do you one better. I’ve actually had this conversation with clients I worked with years ago, and it actually went like this.
Investment newsletter follower: “I’m tired of your diversified portfolio. That’s not for smart investors. I need $100k transferred out from my portfolio. Listen to me. I pay you Eric. How come you never give me tips like this? 8% over the long-term? That’s all you have to offer me? No, don’t talk to me about capital markets and diversification. Just send the money.”
ME:…”You sure? Are you really sure? Are you really really sure? Can we please talk about this more, and consider how you will feel if you are wrong?
Investment newsletter follower: “No, just send the money.” [CLICK]
What? GTBP from 2/1/2018 to 10/18/2019 is down 93.21%… $100,000 is now… $6,790?!
What about the 600% return? You noticed you’re fully protected by an “IRONCLAD 100% money-back double guarantee.” See the bolded print in the picture below. No not on all the money you lost in your portfolio. Just on the money paying for “advice” from the newsletter. Please, take a minute to read the disclosure on the accompanying half page.
Let me highlight a few sentences for you…
“…Is not to be construed, under any circumstances, as an offer to buy or sell, or a solicitation to buy or sell or trade, or as a personal recommendation to buy or sell or trade in any securities or commodities named within these materials.”
“All readers should consult their own personal investment adviser before making an investment decision.”
No…No…Oh no…How could this get worse?
“In an effort to enhance public awareness of GTBiopharma, Inc (GTBP)…a third-party advertising agency provided a total campaign budget of approximately two million sixty-three thousand six hundred and thirty-four dollars to date to cover the costs associated with creating, printing and distribution of this advertisement and other elements of this campaign in an effort to build investor awareness. Strategic Investment was paid thirty thousand dollars as a research fee.”
Just 2,063,634 more reasons that investment newsletters don’t pay off, not just for picks like GTBP.