Investment Newsletters – The Wild West of Investing

Jan 2012

I read an article in the Wall Street Journal (WSJ) this weekend written by Jason Zweig regarding investment newsletters and I found it intriguing enough to mention something about them in this weekly blog.

In the post-Madoff era, it is more important than ever to conduct proper due diligence before investing your money. There is little doubt in my mind that you need to be extra careful when it comes to investment newsletters because they truly are one of the few areas of the investment industry that is lightly regulated at best. If you aren’t verifying their claims you can’t assume that anyone else is either.

The problem lies with the watchdog agencies and a blind-spot in their policing of the industry. The Securities and Exchange Commission (SEC), who is charged with overseeing the financial markets, does not generally regulate the publishers of financial newsletters. The newsletters are subject to the antifraud provisions of the Securities Act of 1933, which means the publishers should not make statements that they knowingly or reasonably should know are false or misleading. However, the SEC doesn’t audit these claims or the newsletter industry in general according to Robert Plaze, deputy director of the division of investment management at the SEC who was quoted in the Wall Street Journal.

The Money Navigator, which is a newsletter published through a partnership between Suzy Orman and Mark Grimaldi, is mentioned in the WSJ article and how a cover story from their December 2011 edition of the newsletter is an example of the issues to watch out for. Apparently, the December issue of The Money Navigator claimed that The Sector Rotation Fund, a fund run by Mark Grimaldi, had returns that were almost double the S&P 500 between 2002 and 2011 according to Morningstar. However, The Sector Rotation Fund wasn’t launched until December 31st, 2009. You can easily check this out by going to, but how many people will actually check it out? Suzy Orman is on TV, how could a newsletter she is involved with make a false claim? The Money Navigator did apologize last week to readers for not catching the error prior to publication.

Like most claims in the investment industry, if it sounds too good to be true, it usually is false whether there is a celebrity endorsement involved or not! Not all claims made by newsletters are as easy to check or verify unless you rely on the word of the newsletter publisher. Please be careful when seeking advice from newsletters because you are venturing into the wild west of investing!


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