Check your inbox: Investing newsletters can cost you more than a sub fee

Be careful what you read and what investing newsletters you sign up for

When I asked myself where these investment “ideas” came from, I realized most sparked from investment newsletters I subscribed to, published by various American stock pundits, self-proclaimed or otherwise. I’d love to identify the culprits publicly but have been persuaded otherwise.

The worst of these stock picks is supposed EV play Lordstown (RIDE), down in my account an astounding 100%, following its recent bankruptcy. Talk about being taken for a “ride”! This “recommendation” was a front-page newsletter rave, and needless to say, I am not renewing that particular publication. 

If there’s any consolation, it’s that I didn’t succumb to the oft-dispensed advice to “average down” as prices kept plummeting.

Another newsletter I will not renew did almost as badly, inflicting multiple losses on such losers as Matterport (MTTR) down a whopping 83% after its recommendation), Zoom (ZM), down 80%, and Coinbase (COIN), down 78%. I won’t name the newsletter as it no longer matters, since the pundit in question resigned in 2022, his patience apparently exhausted long before the “hold with strong hands” stance he recommended for his hapless readers. The newsletter continues under a new editor. 

Speculative is tempting for any Canadian investor

When I looked further into how I subscribed to these newsletters in the first place, I realized they were the result of unsolicited email pitches, typically promoting an offer of USD$49 per year, a seeming bargain even after factoring in the more expensive U.S. dollar. You know the drill: Get three or four special reports that divulge the ticker symbols of these hoped-for 10-bagger moonshots that are as apt to crash your portfolio.

Even with quality stocks starting to recover in 2023, many of these dogs are still languishing at 80% below their highs. From a risk management perspective, I invest far less in such speculations (for that’s truly what they are), compared to blue-chip individual stocks, broadly based exchange-traded funds (ETFs) or guaranteed income certificates (GICs), but those $1,000 speculative losses do add up.

Many I wisely held in non-registered accounts, providing at least the minor consolation of tax-loss selling. Sadly, others were unwisely placed in my registered retirement savings plan (RRSP) and tax-free savings account (TFSA). 

Why? Well, the tax tail waves the investment dog in both directions. 

Back in the go-go era of Cathie Wood—she of the ARK (Active Research Knowledge) funds—and her imitators, while these newsletter tech darlings were surging ever upwards, it seemed frustrating to have to take profits in taxable accounts and share the proceeds with the Canada Revenue Agency (CRA). If these sure-fire investments only go up, I must have reasoned, may as well put them in the TFSA (or worse, RRSP) and rebalance without paying capital gains taxes.

Losses in registered accounts triply sting: apart from the loss of capital, I’ve also destroyed precious contribution room, all without the compensation of tax-loss selling.

Why take more risk than is necessary for a retiree?

While some believe that 5% or 10% of a portfolio can be held in a speculative fun or “mad money” account, that game should be reserved for younger investors with longer time horizons and higher risk tolerances. They have time to recoup any losses and make wiser investments as they age. Having turned 70 earlier this year, I realized it’s time to stop taking any risk that is unnecessary.

For me and others in the “retirement risk zone”—in the five years before or after retirement, a time when vicious stock losses can torpedo a retirement—“job one” is to stop opening those emails. You’ll recognize them immediately, with their subject lines that read along the lines of “The top 5 AI stocks you absolutely must buy now.” The real cost of these newsletters is not the token subscription price. It’s the dubious ideas (many of them SPACs or crypto plays) they encourage you to buy. In my case, I recognize that I felt somewhat obligated to act on the occasional idea, if only to justify the subscription price and earn back the fee.

Stop biting on the initial email pitches, then stop renewing

Most of these newsletters have to be renewed after a year, so so I’ve started letting those subscriptions lapse. Beware, however, of the auto-renewal. Check your credit card statements. If you didn’t get a renewal notice, contact customer service. You’ll probably have to try more than once, as these newsletters tend to rely on auto-renewals and hope subscribers don’t notice. Not all of them advise you in advance that a subscription is coming up for renewal.   

While these newsletters often convey useful insights into macroeconomics and the general investing climate, their actual recommendations tend to be relatively obscure speculative names. I guess they can’t build a media reputation for stock-picking genius by recommending the obvious blue-chip names, such as Procter & Gamble, or tech giants, like Apple or Microsoft. Ditto for S&P 500 ETFs or all-in-one asset allocation ETFs.

For those click-bait newsletters, investments like Vanguard’s VBAL or obvious blue-chip individual stocks just aren’t hot enough, so inevitably they gravitate to intriguing names or sectors around which they can craft enticing stories. These may include sector or regional ETFs, which can also inflict nasty losses. (Do not ask me about the Russia ETF I put in my RRSP weeks before Russia invaded Ukraine! That was a boneheaded move that cannot be blamed on a newsletter.)

A few exceptions: Investing newsletters worth a retiree’s time

I don’t want to throw the baby out with the bathwater, and it’s only fair to say there may be a newsletter that’s the odd exception, particularly here in “conservative” Canada. I have long been on the record for reading and sometimes acting on the recommendations of Patrick McKeough in his The Successful Investor and stable of newsletters like Wall Street Forecaster and Canadian Wealth Advisor. 

Most of Patrick’s stock picks are well-known blue chips. When he does go further afield with foreign or domestic juniors, he identifies them as being riskier and suitable mostly for “aggressive” investors. But I’ve met Patrick in person and trust his judgment. The same can’t be said for many newsletter pundits south of the border. 

Minimize media market noise in your inbox

It’s also worth noting that newsletters are only one part of the noise investors have to put up with. A related habit I’m trying to break is that of having the TV on mute in the background during the day. I used to watch CNN, scrolling the latest prices of major indexes and stocks. For you, it may be CNBC or BNN. You know the psychology playing out here: red arrows equal sad; green arrows mean you’re happy. After the infamous CNN Town Hall that became a thinly disguised Trump rally, I swore off CNN and replaced it with the BBC. Interestingly, it has no stock quotes. When I want stock prices, I go online, which I tend to spend much less time on compared to watching the muted electronic hearth.

Other influences on investing: Twitter, Mastodon and social media

Finally, there’s social media. Just as I now avoid CNN, I no longer trust Elon Musk’s X, formerly Twitter. I am still there because my website runs an ongoing Twitter feed (@JonChevreau). And yes, I did ante up for the now-disgraced blue tick, but not because I wanted the validation. I’ve had the blue tick as a journalist for several years. And the main reason I paid for it was the built-in two-factor authentication.

However, I pay no attention to the “For you” and “Following” feeds Musk attempts to ram down users’ throats. Instead, I use my own customized Twitter list of roughly 700 sources. It’s called Findependence Day, and it is available to anyone who wishes to follow “X” lists. Some 5,500 follow that list. The main way I communicate there is via the @ button, where groups of financial bloggers tend to copy each other on their observations, including occasional MoneySense contributor Dale Roberts (@67Dodge). As I confessed in a blog on the Hub last autumn, I now am primarily on Mastodon and more recently Threads, but I consider myself a “triple citizen” of all three sites.

As a long-time financial journalist, it’s not easy to start disengaging from the drama of the markets, but personally, I’m starting to feel calmer leaving the bulk of our investments in broadly based low-cost ETFs and laddered GICs. We (and perhaps you) end up owning a small part of every stock in the world, so there’s no need to feel you’re missing out on anything. As an example, anyone with broadly based global or U.S. equity ETFs would have had roughly a 1% position in current market darling Nvidia, even if they didn’t realize it.

More likely, you’ll avoid big losses on too many concentrated individual stocks, whether or not they originated with an investment newsletter.

Read more Retired Money columns:

• The best ETFs for retirement income
• Is semi-retirement stressful? You bet—here’s what to do about it
• Should retirees in their early 70s partly annuitize?
• Is now the time for retirees to sell stocks and buy GICs?
• The five factors of retirement for Canadians

About Jonathan Chevreau

As MoneySense’s Investing-Editor-at-Large, he is also author of Findependence Day and co-author of Victory Lap Retirement. Reach him at [email protected], where he is the founder of Financial Independence Hub.

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