| From horse racing to the stock market, there's nothing quite so satisfying as possessing knowledge others don't. |
| |
| "The online trading - as opposed to investing - industry is based on the myth that you can outsmart your neighbour, who in turn believes he can outsmart you," says Moshe Milevsky, associate professor of finance, Schulich School of Business at York University. |
| |
| That notion fuels a range of businesses offering online stock tips and strategies, often on a subscription basis, with advice emailed to subscribers. However, these same tips are available to anyone willing to pay the subscription price. That may include your neighbour, your neighbour's neighbour and even professional investors, if they're so inclined. |
| |
| "Nobody gives away anything of value for a few dollars," says Eric Kirzner, a professor at the Rotman School of Management, University of Toronto. "My problem with these types of services is that they focus the retail investor on particular stocks instead of their overall portfolio. It's dangerous because it moves them away from good asset allocation. Picking individual stocks is damned tough work. You can't rely on the idea that these services will be able to provide better information than anyone else can." |
| |
| Some services highlight the credentials of their experts; others promote the anonymity of their analysts. Subscribers to U.S. stock picking service GorillaTrades, for example, await emailed GorillaPicks selected using a computer algorithm and approved by someone known only as the Gorilla. |
| |
| "If the Gorilla knows something useful that can't be gleaned using conventional stock analysis, he probably wouldn't give it away for a small fee," says Mr. Kirzner. |
| |
| He says professional stockbrokers and investors have probably moved on any stock tip worth knowing long before subscribers can act on a group email generated by a stock picking service. |
| |
| "We wouldn't argue with the statement," says David Thornton, director of sales and marketing with VectorVest and VectorVest Canada, a service that offers subscribers buy, sell and hold advice on a suite of stocks. |
| |
| "Professional traders and the large investment houses have an advantage over the retail trader. What is the retail trader to do? Just give up? There's much more to investing than short-term price moves based on early information. We all know that the professional traders are not always right. Sometimes, not even close." |
| |
| VectorVest's pitch is that although the service relies partially on a technical analysis of a suite of stocks, that information is combined with traditional stock valuation to provide subscribers with information that will help them invest over the long term. |
| |
| MicroCap.com provides email stock advice but focuses on valuation of microcap and penny stocks. Analyst Danny Deadlock says that his company provides an overlooked perspective because institutional investors often ignore the more volatile penny stocks, which require more ground-level research and offer smaller aggregate profit opportunities. |
| |
| "This is educated gambling and while these small stocks may be risky, they can also be financially rewarding," says Mr. Deadlock. "I provide an extra set of affordable eyes and ears." |
| |
| Mr. Deadlock says the majority of brokers, analysts, and fund managers are no better at picking stocks than the average experienced retail investor. |
| |
| "One would assume that professional money managers would not make the mistake of dumping $1-billion worth of RIM stock near the 52-week low in August, only to have the stock recover 40% within three weeks," he says. |
| |
| "In my assessment, there was no rational logic for RIM to be beaten down to that level. Whether it's a small-cap or a blue chip, you often have to think and do the opposite of the crowd." |
| |
