In response to Anatomy of a Personal Finance Magazine Article:
I agree that the personal finance magazines generally preach the same idea with diversification and cost-minimizations, however, they do do their homework when it comes to stock picking. For general advice, it’s usually the same. But for stock picks, it has to be specific and they need a support reason as to why to buy now. That comes down to the analyses. The analyses gives you an idea of the company’s business model, what has happened to the stock, and how they’re going to improve their business model or stock price. While results are not guaranteed, the analyses allow you to see if you’re interested in pursuing further research with the company. No one should take a stock tip and follow blindly. Always do your own due diligence.
In the January 2007 of SmartMoney, on page 32, article “A Winning Year”, SmartMoney prints a performance review of each of their monthly mock portfolios. Obviously, not every one of their stocks beat the market. That would be insider news, not stock analyses. But it also shows that not everything magazines say is hot air. They do have valid supporting points and the reader should do more research before investing. The same goes for real estate and any other investment. Even if you have heard a magazine or a friend telling you of a property is a must-buy, it would be wise of you to do your own research and buy on your own discretion. After all, it is ultimately you who would be taking the risk.
I usually take the magazine stock picks as a starting point. Some of my trades are from personal finance magazines and they seem to serve as a great base for research.