Can We Make Money From Tipsters?

Jan. 8, 2024

First off, I love the word tipsters.

Some of the research for today’s Newsletter came from a British article and “tipsters” sounds very British.

But all it means is “investment Newsletter”.

The tipster industry is alive and well and many people subscribe to them for stock picks and advice.

Which, of course, begs the question: Can we actually make money off of them?

Let’s take a look.

The aforementioned article took a look at some prominent Newsletters that give out stock picks. A lot of them were Europe-based, and I don’t find that very helpful.

Some are recognizable, though, so they’re worth examination. Here’s the list:

Daily Mail Midas Portfolio

Following the Daily Mail portfolio would have returned 17% in 2019, 21% in 2020, 6% in 2021, and so on. Overall, $10,000 would have turned into $16,000 if we followed their advice.

Here’s Barron’s. Barron’s has been around for decades and is the most respected service out there.

With venerable Barron’s our $10k would’ve turned into $17.6k. Not bad.

How about Motley Fool? Everyone’s heard of Motley Fool.

Unfortunately, this research only had two years for the Motley Fool. But those two years were worse than Daily Mail and Barron’s and $10,000 would’ve dwindled to only $7,500.

There were also several other European-based newsletters on the list that were a lot lower than our top 2. The interesting one was the Interactive Investor. It had a couple of monster years early on:

It went up 100% to start, but it started falling hard in 2022 and stayed down in 2023.

It’s also a good lesson about compounding. If you compound early, you can be like Buffett. If you compound late the wrong way, you can make a 41% total return turn into break-even. Even though this service has produced a decent total, having the losing years last takes away nearly all the money.

That said, how do any of these compare to the S&P 500? Here’s the comparison:

Just buying the SPY beat them all in this time period. It would’ve doubled a $10k account.

So, can we make money from tipsters?

Yes.

And no.

Those particular stock-pickers did not beat the market since 2019. That doesn’t mean the market wins, of course.

It just means these newsletters’ methodology is not very good.

At least not in the past five years.

Talk to you soon.

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