What Is a Market Letter?

A market letter is a short publication that informs investors and other stakeholders, often via paid subscription, about a particular category of investments.

Market letters will typically focus on a specific area of investing, such as growth stocks, value stocks, or real estate. A real estate market letter, for example, might provide commentary on market trends and Real Estate Investment Trusts (REITs).

Key Takeaways

  • Market letters are publications that provide information and advice about particular types of investments.
  • There are thousands of market letters to choose from, covering a wide variety of investment types. Most market letters underperform their stated benchmarks.
  • Anyone can start a market letter, so readers should be careful to avoid unscrupulous or ineffective publications.

How Market Letters Work

There are thousands of market letters available online, covering asset classes ranging from stocks and bonds to alternative investments. While many market letters recommend individual investments, others focus on educating the reader on select investment strategies or industry sectors.

The quality of information given can also differ widely. Anyone can start a market letter, so readers should consider the track record of the author as well as any conflicting interests they might have.

Newsletters tend to proliferate around hot or new sectors, such as cryptocurrencies and blockchain. Investors would do well to keep in mind that these markets and technologies are so new that there are few experts with long-term track records. Therefore, it can be especially difficult to identify credible market letters within these sectors.

Readers should be particularly cautious when dealing with specific investment recommendations. After all, an unscrupulous publisher could take advantage of their readers, such as making insincere recommendations as part of a pump and dump scam.

Real World Example of Market Letters

Some financial service providers help readers select which market letters to follow by tracking those letters’ performance. They do so by evaluating how well investors would fare if they followed the advice of those letters.

Hulbert Ratings (formerly known as the Hulbert Financial Digest) is a popular source of information on market letter performance. The publisher, Mark Hulbert, told Kiplingers in 2016 that fewer than 10 percent of the market letters followed by his publication beat their stated benchmarks.

To help guide readers toward letters with relatively good performance, Hulbert Ratings publishes an “Honor Roll” featuring the year’s best letters. Examples from the 2018-2019 Honor Roll include market letters focusing on companies with strong share repurchase programs, dividend-paying value stocks, and Canadian equities.