If you're like the average investor today, you own a mixture of asset classes, which might include CDs, money market funds, T-bills, bonds, mutual funds, and ETFs, all of which are managed by third parties and are passive by their nature. But it's often the performance of the individual stocks in your portfolio -- the assets you manage -- that weigh most heavily on your overall returns. However, unless you're a full-time investor, it's hard to find the time to do the work and analysis needed to discover those winning stocks -- and to do it on a consistent basis. This is where a market service comes in.
These services usually fall into two categories -- trading or investing -- and could be considered Cliffs Notes for the market, but without the stigma. They're essentially subscription services, usually ranging from $49 to $99 a month, which deliver distilled market knowledge right to your inbox or RSS feed. The difference between these services and a traditional investment service or newsletter is that they aren't the recommendations of a faceless research department from a large brokerage or investment bank. This new generation of market services are produced by individual traders and investors who are more accessible, accountable and transparent than ever before.
With the advent of the Internet, and then even more so with the explosion of social media, full-time traders and investors began to realize that they could monetize the work that they were already doing. This often involves spending 40 hours a week, or more, watching every movement of the markets (remember, futures, currencies and international markets are open around the clock), and looking at hundreds or even thousands of charts in order to find the best opportunities to make money. By offering the fruits of their labor to the public for a fee, they're able to create a new revenue stream that's not dependent on the markets and that helps to smooth out their equity curve.
So for the price of admission, you usually get a nightly watch list of potential investment candidates, complete with analysis and strategy suggestions. Most services will also have regular blog posts covering market education. In addition, many services offer live chat rooms during market hours where you can communicate with the service's author and watch him make trades in real time, as well as interact with other like-minded traders and investors. This is an excellent way to exchange ideas about the markets and oftentimes end up with a virtual mentor who can help you improve your performance and returns.
Though purists may claim that this isn't "true" investing -- that you're being "given the fish" instead of "learning how to fish" -- that's not the case at all.
All you're doing when subscribing to a market service is making the process of finding great stocks more efficient by allowing someone who already does it -- and probably does it better than you -- do the heavy lifting for you. In the end, the decision to buy or sell a stock -- and how you decide to manage your positions -- is up to you. You have the final discretion and responsibility. But you'll also have a narrower, more focused, and more vetted pool of candidates to start from. That advantage in 2013 might have made the difference between being in IBM (IBM), which is down 1.9 percent for the year, and being in 3D Systems (DDD), which is up 158 percent.
Unfortunately, the world of trading services is not without its "get rich quick" types or its scam artists, so you have to do your due diligence before choosing a service. A good place to start when trying to find a quality service is in an active community like StockTwits. There it will become quickly apparent which services are worth their salt and which ones are blowing hot air. Most legitimate services will also offer a trial period where you can test them out for free to see how their performance is and if their investment style fits your own.
No man is an island, or even a peninsula, so I encourage you to give me your feedback in the comments below. I also want to hear what else you'd like me to write about, so please let me know either via Twitter or email.