Well, I have received several queries from both our existing customers, potential customers and many readers. But, they have all been on usually stocks or with respect to some sectors. Some queries also come to me asking where the markets are headed :). But, for the first time I received a query from a young chap from Australia asking me how to select an equity research service provider. He even went on to the extent of asking which service offering or package to go for.
His queries were quite valid, especially in a scenario where we have so many equity research service providers even more than the number of stocks listed on the BSE. So here goes some pointers for you Karthik and I have made sure that I am far from partiality / preferences.
Type of service providers – There are so many service providers – very few of them are registered companies while most of the others are run by an individual or a group of individuals. Go for a service provider which is not dependent on individuals.
Many of these services work on the basis of yearly subscriptions and in such a scenario going for a service run by a single person or even group of few people carry very high risk. The service may stop at any point of time owing to various reasons which will have the dependence on one person as its base. It is better to go for a registered company or for a service provider where the loss of an individual will not affect your subscription.
Authenticity of the service provider – This may be a tough one to check, but is one of the important step before subscribing. It is an ugly fact that there few service providers who run the service out of their hard work and many others who just steal the data and sell them, often at a lower price tag.
We are in a society where pirated movie CD s have their own craze and a big market due to the lower price tag and the people fail to understand or ignore the original hard work and investments. The same is the case here as well.
While identifying the source of your service provider may be a challenge, nowadays so much of commentary is available on the net on a particular service provider, if he steals data. It is to be noted that this is mostly the case with services provided by individuals. You should also consider the fact that while you may be receiving the pirated reports at a lower price, the service may stop at any point, if your service provider is caught.
Check the RECENT performance – Nowadays, almost all of the service providers come out with their performance score card. But, this is the biggest trap that they have for you and it is here that you have to be really really careful.
Some service providers will tell you that they have come out with so many 10 baggers. But when was the recommendation given is something you should look into. I have personally seen many of the service providers saying that they have come out with 8 baggers and 10 baggers and finally it happens to be that the recommendations were given in 2004. So, make sure that you check the RECENT performance.
Check the COMPLETE Performance – This is one other tactic which many of the service providers use to lure you into subscriptions. Say that they have a package which recommends 40 stock or 50 stocks in a year, it is highly likely that at least few of them will give exceptional returns. But, you may not be benefited from it since you may not have invested in it or you may have made very small investments or you may have already lost hope with your service provider.
So, it is always better that you ask for and check the performance of all the stocks that were recommended in say a 6 month or 1 year period. This will give you a clear picture of what the true performance is.
You may end up seeing just 4 stocks out of 40 stocks recommended doing well and all the remaining quoting in losses. This is a very common tactic that the service providers use – showing only the best performing stocks or in this case just 4. So, be really careful out here.
Do not believe the reviews on the internet – This may sound strange to you but that’s the fact. I am not saying you should complete ignore the comments but take them with a pinch of salt. Because, say that there are 100 subscribers to a particular service provider and let’s consider that the service has been average to GOOD, in such a way that 10 subscribers are unhappy and the rest 90 are Ok to happy.
In such a case, what will happen is the 10 subscribers will try to stand on their roof and shout as much as possible while the rest 90 move on with their work in a silent manner. So, from the review / comments of these 10 subscribers, was it that the service was poor? Not at all, the rest 90 are happy with their returns.
And, to add to this, as I said before, when you check the RECENT and COMPLETE performance, the eventual truth would come out.
Customer Service – To be frank, customer service is something unheard off, with most of the current service providers. Other than the investment reports, check with the service providers, what kind of support he will be providing you over the subscription period. Also, check with him if you can directly contact somebody to clarify some of your queries, at least on the investment reports that they provided you.
You can also check with existing customers, but again, take it with a pinch of salt. He may have made or lost huge money due to the service provider and that will influence him.
Karthik, I believe the above six points should help you out in selecting the service provider, but what about the various package or services that one offers ? That is something that we will discuss over here tomorrow.
$Multibagger package Team
Arun@hbjcapital.com
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