In Part 1, we took a look at several types of investment advisors. We concluded that if you have very little experience at investing, then it may be cost effective to go to a fee-based financial planner to get a basic education about investing - although a similar education can be had by reading books. However, most other types of investment advisors (at least in my experience) don't deliver an increased return on a consistent basis. However, there are a couple of things that have been working well for me for the last few years to deliver above-market returns - and I'll tell you about them below.
The #1 resource that has been most effective for me over the last few years is the American Association of Individual Investors (AAII). The AAII provides you with 10s of stock screens based on different investment approaches that are continually updated - and as they say on their website - 94% of AAII Stock Screens Outpace the Market. Some of them outpace the market by a mile - their top performer is up 329% for the year. Will you guess the top performer at the start of the year? Probably not. However, why not pick 2-3 that you believe in and got for it? It's likely (94%) that you will outperform the market. My AAII membership has paid for itself 100 times over - I really feel like I have gotten value out of it.
(Side Note: These stock screens can be volatile, so don't do this with your entire portfolio. Keep the 401K in relatively stable stuff like index funds or large cap. However, for 10%-20% of your portfolio, you might want to try another strategy. If it goes well, great! If it goes poorly, you are not completely screwed.)
CONS: The AAII materials are awesome, but they may not be readily understandable for beginners - you may need significant knowledge before you can take advantage of them. You also need significant assets to buy the many stocks in their model portfolios.
If you are earlier in the investment learning curve, then I highly recommend Kiplinger's Personal Finance Magazine. You can start learning about investment principles and see how they play out over the course of a couple years before you start investing real money. I have been a subscriber for more than 15 years, and I still find the subscription to be valuable. I have tried just about every other investment magazine on the market and the only two that consistently provide value are Kiplingers and to a lesser extent SmartMoney (by the Wall Street Journal). I also really feel like I have gotten great value from my Kiplinger's subscription.
The #2 resource that has been effective for me over the last few years is the Motley Fool. They have a lot of great articles and a solid investing community. Their stock services (like Stock Advisor, Hidden Gems, and Rule Breakers) have also been very valuable. I feel like I have gotten good value for the stock service information that I have paid for. I recommend Stock Advisor and Rule Breakers.
CONS: There are no guarantees and you have to pay for the stock service, but their track records are excellent.
Overall, I am sure that there are other newsletters and stock advisory services that can be valuable, but these have been working for me.
I have also tried several services that did not work well at all and I will not mention here. Of course, you could spend money and get a formal education like an online finance degree, but that is expensive. Once you have that reasonably stable set of core investments - probably through your 401K and with index funds - you can afford to look for a higher return with 10-20% of your portfolio. Not everything will work, but you will be learning along the way - and I have not had any better results over more than a decade of using various professionals.
Any comments on this methodology or a different methodology that would help our discussion would be welcomed.