017 Stock Market thread
09-24-2018, 02:02 PM
Quote: (09-24-2018 12:40 PM)Arado Wrote:
Anyone here ever use the Motley Fool Stock Advisor subscription service?
I'm sceptical about these subscription newsletters, online experts, whatever you want to call them. They make their money by selling subscriptions to their newsletter and they make that money no matter if their advice is good or bad.
I haven't done any analysis of their claimed portfolio returns, but I suspect that they have picked a few winners (luck) and those good returns have offset a load of bad/ average picks. So to get their claimed return you would have needed to buy all the winning stocks that they recommended (at the same portfolio weighting that they have). Now in order to have bought all the winning stocks you would have also had to have bought all the losing stocks because no-one knows which stock will be a winner or loser at the time you buy.
Additionally, to have achieved the long term returns that they claim you would have had to held the full portfolio for the full term. A more likely scenario is that most people pick a few of the recommendations to buy (because they don't want to trade on every recommendation that is published) and end up picking a few losing stocks which result in an overall average/ losing portfolio performance.
It is also likely that once the stock you have picked starts losing value you will sell and crystalise your loss. Most people then repeat the cycle, buy a few more of the recommended stocks which will include some losers and then sell when they see the stocks going down.
Also likely is that is if people pick a winning stock they will sell once they make a good return of say 30%. Few people will hold a winner for the long term because the temptation to sell and take the profit/ avoid losing the profit is too great. Taking a profit isn't bad, but most people won't let profits run for too long and therefore not achieve the large long term gains required to offset the multiple losing stocks that would also have been bought along the way.