Last September Money Magazine ran an article about 4 of the top internet stocks and their advice on the coming months.
One
of the nice things about getting your advice from a magazine (or the TV
shows, radio shows or litany of other media outlets) is that you get it
without the pressure of the salesman. Free advice, right.
Its a small price to pay for bad advice but a big loss if you followed their advice.
I
have been following their ?advice? for a while. I actually have the
magazine covers of one of their most popular editions they come out
with each year where they give their best mutual funds of the year
prediction. Over the period of February 1992 to February 1999, they
recommended 64 total funds to buy. What the recommended one year rarely
made the list the next year and if you followed their advice then you
would have actually lost money. What you would want to do is buy the
funds the year before they recommended them. Mutual Funds make money
when investors buy the shares. Investors buy the shares when they are
told to buy Money Magazine (in theory). Money Magazine is supported in
large part by mutual funds and it seems that if a mutual fund wants
people to invest in their funds, a good place to go is Money Magazine.
So more money goes to advertising and other contributions to the
magazine.
The fact of the matter is that Money Magazine makes
their money buy selling magazines and advertising space, not by giving
investment advice. Please be careful when taking their advice.
The same argument can be made with stocks.
So
back to the article from September. They recommend that you avoid
Google and Yahoo stocks and buy eBay and Amazon. They make what appears
to be good arguments in both cases. What is the end result?
First their recommendations:
eBay stock on 9/1/04 – $43.81
eBay stock on 1/6/06 – $45.88
Annual Rate of Return – 3.5%
Amazon stock on 9/1/04 – $38.24
Amazon stock on 1/6/06 – $47.65
Annual Rate of Return – 16.6%
Both not terrible choices, but nothing spectacular. At least you didn?t loose money like some.
Now the stocks to avoid.
Yahoo stock on 9/1/04 – $29.01
Yahoo stock on 1/6/06 – $41.53
Annual Rate of Return – 27.2%
Google Stock on 9/1/04 – $100.25
Google Stock on 1/6/06 – $451.24
Annual Rate of Return – 118.3%
Enough said.
Thanks Money Magazine for another piece of great investment advice.
