Prudent Speculator Review

prudent speculatorInvestment newsletters have been around since before the crash of 1929. In fact they’ve probably been around since the birth of the stock market in 1792.

Usually found floating around the back ally’s of Wall Street, laughed at by the big institutions and smeared with a dirty reputation, there’s many a broker that would sneak a peak at one during his lunch break before hiding it under his jacket like an old copy of Playboy.

But do they deserve their bad reputation? Well some certainly do yes; many an expert marketer has built a lucrative list of subscribers only to supply them with a list of stocks picked at random. But it’s unfair to tar all newsletters with the same brush, after all there’s got to be a few great investors out there willing to share their wisdom for a small monthly fee, right!

So how do you choose a good one. Well one way is to sign up and start trading along, if after twelve months you have more than you started with it’s a good one, if you have the same amount it could still be ok and if you’re bankrupt then it’s a bad one.

There is of course an easier way, I’m going to give you a quick review of one of the most respected investor newsletters around, the Prudent Speculator.

Created in 1977 by money manager Al Frank, this is one of only a handful of newsletters that are universally respected by both Wall Street Veterans and retail traders alike. The fact that its existed for so long should give you a pretty good idea about its quality. In fact Mark Hulbert of MarketWatch rates this newsletter number one for 10, 15 and 25 year returns and Forbes magazine a strong proponent of investment newsletters, regularly lists recommendations from John Buckingham the editor of The Prudent Speculator in its Guru Picks section.



At $295 for a year’s subscription it’s not too badly priced, there are newsletters that perform half as good but cost twice as much. Sure it’s not cheap but no investor worth his salt is going to give you the keys to the honey pot without coughing up something in return.

When looking at the results of any newsletter always remember that quoted returns are for the entire portfolio of stocks listed in the report, if you miss a few trades your performance will suffer substantially. It’s rare for any investor to achieve the same results as the quoted returns over a given year. For a start you may not have the required funds to invest in the entire portfolio.

But the quoted returns of Prudent Speculator over the last 25 years are such that even if you trade 50% of the stocks recommended you should still see a healthy return on your investment.

One of the things I don’t like about newsletter trading is that they don’t teach you anything about trading; you’re effectively acting like a sheep, investing in stocks without really knowing why.

Therefore it’s imperative that you find out the investment philosophy behind the system before you begin trading it. In the case of Prudent Speculator this is easy, they look for stocks trading for low multiples of earnings, sales and book value, and ideally select those with a nice  healthy balance sheet, their strategy is to buy and hold.

This type of strategy has its drawbacks however, particularly for the inexperienced investor. Long term investments in out of favor stocks can incur significant drawdown’s before any profit is realized, so you need to hold your nerve and be prepared for a roller coaster ride.

Prudent Speculator doesn’t recommend applying stops to your trades either so this system is not for the faint hearted. If you’re trading on margin you need to be careful you don’t over expose yourself as one bad day could literally wipe you out, drawdown’s of 25% are not uncommon using this system, so be careful.

Remember this is a buy and hold strategy not a get rich quick scheme, so you’ll need to give it at least a year before you see any results. Too many people dismiss long term strategies after a few months of small losses; there’s little point signing up for one month, you need to be committed to it for the long term.

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