Top Six Questions to Ask BEFORE You Trust Investment "Experts"

Before you even think about listening to what anyone has to say about investments, including subscribing to an investment newsletter, you need to ask yourself a few questions.

Always remember that all content is not created equal.

Just because something is published in print, online or aired in the broadcast media does not make it accurate or valuable. 

In fact, more often than not the larger the audience, the more likely the content is either inaccurate or slanted.

Most people associate credibility with name-recognition. But more often than not, name-recognition serves as a predictor of bias if not lack of credibility because the more a name is recognized, the more the individual has been plastered in the media. And every intelligent person knows that individuals who have been provided with media exposure because they are either naive or clueless. 

The media positions these types of individuals as “credible experts” in order to please its financial sponsors; Wall Street.  

Before you even think about subscribing to an investment newsletter or sending you hard-earned money to a financial firm or fund, you need to ask yourself a few questions:

1. What is their track record?

It is critical to know the track record of anyone you plan to trust for insight and recommendations. The problem is that most investors do not know how to analyze a track record.

Always examine the track record of your source in depth, looking for accuracy and specific forecasts rather than open-ended statements.

Although the process can be detailed, you should at least do the following:

-Determine their hit/miss ratio; how many times are they wrong versus right?

-Determine whether they have been preaching the same lines for years; if so they have no credibility since a broken clock is always right once a day.  Timing IS important (virtually every doom and gloom clown you can imagine - Schiff, Faber, Weiss, Prechter, etc.)

-Determine the source of the track record; was it in a form that cannot be altered?

-Determine their full track record; many financial professionals who specialize in marketing and virtually all newsletter publishers cherry-pick their winning calls while neglecting to show you their losing calls.

They also like to extrapolate their claims. For instance, most of these charlatans may have stated that “Bear Stearns was in deep trouble” only later to have claimed that this was a prediction that it would go bankrupt. Without examining their full track record, you cannot determine their accuracy.

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