A well-stocked bookstore is likely to offer dozens of financial and business magazines. It usually takes a while for a newcomer to financial reading to gain a feel for their individual “personalities.”

Many magazines focus on the economy and corporate America (Forbes, Bloomberg Businessweek, and Fortune being the best-known) and are of interest primarily to business executives and advanced investors. Some target the personal and family-finance arena (Money and Kiplinger’s) and write for a general audience. Still others target more sophisticated investors and traders (Bloomberg Markets, Modern Trader, and Technical Analysis of Stocks & Commodities).

The mass circulation of magazines combined with their advertising revenues makes it possible for them to offer annual subscriptions in the $10-$25 range. Newsletters, which lack these advantages, are typically priced considerably higher. The average annual subscription cost of the 182 newsletters listed in the Hulbert Guide (surveyed in 2015) was $296. SMI has succeeded in staying well below the price of the typical investment newsletter.

You may wonder why someone would pay a higher price for an investing newsletter when the magazines seem to offer more content. To put this question into perspective, let’s consider a few of the fundamental differences between financial magazines and investing newsletters such as SMI.

  • Circulation.
    The general circulation publications write for a broad audience. Typically their readership is measured in the hundreds of thousands, some in the millions. Newsletters, on the other hand, are targeted to smaller groups with clearly defined special interests. Their circulation often is measured in the hundreds; only a small percentage exceed a few thousand. (This comparison refers to print circulation only. Some investment newsletters have adopted an Internet-only business model and may reach a wider audience.)
  • Editorial mission.
    Because they address a broad audience, financial magazines must keep their content varied. Typically this means their writers are generalists — journalists first, and students of finance second. They are best at writing about the economy, financial trends, and floating a variety of investing ideas. Financial newsletters, on the other hand, exist to focus attention on a narrow list of topics in which their readers have a particular interest. They tend to be written by people who have specialized knowledge about investing; their writing skills are secondary.
  • Recommendations and follow-up.
    Through their cover articles, monthly features, and money-manager interviews, magazines make investing recommendations. Lots of ‘em. In a quick survey of the September 2016 Kiplinger’s magazine, I found five articles with more than 50 mutual funds mentioned favorably. How would you begin whittling that number down to a manageable size and deciding which ones to buy? And since it’s rare for a magazine to issue a sell recommendation, how would you know when it’s time to replace them? In contrast, a good newsletter will offer model portfolios with specific buy and sell advice that is easy to understand and implement.
  • Accountability.
    How do you know if a magazine’s recommendations have proven profitable over the years? They don’t publish model portfolios you can track, nor do they go back and provide a report card on how well you would have done following their advice. Newsletters usually do both.
  • Advertising.
    Magazines are subsidized by large advertising revenues from companies that sell financial products and services. This presents a potential conflict of interest in terms of their editorial content. For example, what is the probability of Money running a cover article critical of those fund organizations with the poorest service or which charge the highest expenses? Not very likely when you consider who their primary advertisers are. Newsletters avoid such conflicts of interest.

Understanding the differences between these two kinds of information sources will help you to be realistic in what you expect from them. Mass circulation magazines are fine for information on trends and a generalized approach to personal financial planning and investing basics. But when making actual investing decisions, tune out the magazines and rely on the timely and unbiased buy/sell recommendations of the newsletters.