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The stock market returns around 10% on average over the long term. Investors who want to sit back and relax can automate their stock investments by investing in index funds managed by a robo-advisor or investment advisor. It's simple and effective.
But what if average returns aren't enough for you?
Individual stocks that outperform the market are frequently sought after by investors looking for a competitive advantage. While some prefer to research these stocks on their own, using methods such as the CAN SLIM strategy, others are content to rely on equities experts to do so.
What Is a Stock Picking Service?
Stock picking services do exactly what their name implies: they select specific stocks that they believe will outperform the overall stock market. They recommend those stocks to you, which you can take or leave as you see fit.
They appear straightforward, and they are, but many new investors confuse them with services that sound similar.
Stock screeners, for example, are tools that help you narrow down the thousands of available stocks to a manageable few based on your specific criteria.
While related, stock scanners are a different type of online investing tool that streams stock-related data and alerts in real time.
Stockbrokers, of course, provide the actual mechanism for buying and selling stocks online.
Keep in mind that these services frequently overlap. The majority of stockbrokers provide stock screener tools. Real-time stock scanning is provided by some stock screeners.
What to Look for in a Stock Picking Service
Some stock picking services are better than others, just like everything else in life.
However, stock pickers do not simply differ in terms of quality. They also differ in terms of focus.
Many cater to day traders or swing traders, assisting them in identifying stocks poised to jump or drop sharply that day or the following week. Others cater to long-term buy-and-hold investors, recommending stocks that they believe will grow rapidly in the coming years.
First and foremost, seek out stock pickers who have a proven track record of outperforming the market. No stock picker will always get it right, but the astute ones will be right far more often than wrong.
Before taking investment advice from any stock picker, check their credentials with a track record. When possible, compare their picks' returns to the market as a whole. It makes no difference if their picks grew by 30% last year if the market grew by 35%.
The greater the length of that track record, the better. Look for experience in your stock pickers, as a good year or two could be due to luck. Twenty years of high picks indicate talent.
Examine the honesty of stock pickers as well. Ethical and transparent stock pickers never mislead their audience by, for example, recording trade wins but leaving losing trades open and only reporting the closed wins.
Similarly, they never record profits until they have them executed and in hand. They don't make claims for hypothetical historical profits they didn't actually earn, such as "Our system would have earned a 1,000% profit over the last ten years!"
Look for indicators of credibility and transparency, such as free trial periods and money-back guarantees. It is always beneficial to try a service before committing your money indefinitely.
Finally, ensure that you understand their stock selection strategy. Do your homework to understand the stock picker's methodology and ensure it aligns with your personal investing goals. Reputable stock pickers explain their approach and the data analysis they use.
Best Stock Picking Services
Regardless of your investment strategy, there’s a stock picking service designed for you.
Here are the best currently available to help you beat the market.
Designed for: Long-term investors
The Motley Fool has been around for about three decades and has risen to the top of the list of long-term stock pickers.
As of October 2021, The Motley Fool's Stock Advisor picks had delivered nearly five times the returns of the S&P 500 since their inception. That's a cumulative return of 683 percent versus 143 percent for the S&P, which makes for an impressive visual:
Further reinforcing the integrity of their approach, they urge you to commit to three investing principles when you enroll:
- Own at least 15 stocks.
- Hold your stocks for at least five years.
- Expect market downturns every five years.
The Motley Fool was founded in 1993 by two brothers, David and Tom Gardner. In the decades since, the two brothers have written four bestselling books, partnered with NPR for investing radio segments, and launched a series of wildly popular podcasts.
With more than 700,000 subscribers, their Stock Advisor service has performed spectacularly by any standard.
The service includes four newsletters every month, starting on the first Thursday of the month and then arriving weekly.
The first and third newsletters contain a new stock recommendation, and the second and fourth Thursday’s newsletters contain five New Best Buys Now stock picks. The latter comprise previous picks that they still recommend as strong buys.
When market conditions change, subscribers receive “sell” recommendation emails in real time. Subscribers also get access to Fool’s “Top 10 Best Stock to Buy RIGHT Now” report and their “Top 5 Starter Stocks” that they recommend for all new investors.
The Stock Advisor subscription costs $199 per year, with a discounted $79 offer for the first year (new members only). With its 30-day money-back guarantee, you can try a full monthly cycle before deciding whether to continue.
Designed for: Long-term investors
The Motley Fool provides more than just the Stock Advisor subscription. The Rule Breakers newsletter highlights "hidden gem" growth stock picks, with a focus on companies poised to disrupt their industries.
According to The Motley Fool, the Rule Breakers stock picks have returned 371 percent since their inception in 2004. In comparison, the S&P 500 gained 123 percent during the same time period.
If that appears to be weaker than Stock Advisor's pick returns, keep in mind that Stock Advisor was founded several years earlier.
The Rule Breakers stock picks are typically up-and-coming companies rather than established mega-corporations. Because of this, Rule Breakers should only be considered if you're looking for scrappy growth stocks that the rest of the market hasn't discovered yet.
Subscribers to Stock Advisor receive stock recommendations on the first and third Thursdays of each month, as well as five New Best Buys Now on the second and fourth Thursdays. You also get real-time sell notifications and access to The Motley Fool's Starter Stocks.
Rule Breakers costs a little more than Stock Advisor at $299 per year, but you get the same 30-day guarantee.
Sign up and you’ll receive a 14 day free trial.
Designed For: Buy-and-hold investors, day traders
Seeking Alpha Premium is a powerful package of market intelligence tools designed to help you become the best investor or trader — or both — you can possibly be.
For $19.99 per month — an annual savings of $120 — Seeking Alpha Premium delivers:
- Unlimited access to premium content created and curated by Seeking Alpha’s deep stable of expert contributors
- Seeking Alpha Author Ratings and Author Performance metrics
- Proprietary quant ratings available nowhere else
- Unlimited earnings call audio and transcripts
- Powerful stock screeners
- Article sidebars with key data, charts, and ratings
- Tracking for each investment idea’s performance
- And much more
4. Trade Ideas
Save 20% off a new Trade Ideas monthly or annual subscription when you use the coupon code TESTDRIVESALE. It will expire on March 7, 2022.
Intended for: Day traders
Trade Ideas' software platform employs "Holly," an artificial intelligence, to generate real-time trade recommendations for subscribers. Holly, which is comprised of over 70 proprietary algorithms, runs over 1 million simulated trades each night before the trading day begins.
She then makes real-time stock trade recommendations, including recommended entry and exit points. This results in a full day trading plan for each pick.
Trade Ideas also has its own internal broker, which allows you to authorise Holly to execute trades on your behalf rather than buying or selling through your own separate brokerage account.
Trade Ideas' simulated trading option is a particularly appealing feature. It allows you to trade with simulated money and gain experience before slinging your hard-earned cash around the market.
The numerous features of Trade Ideas come at a high cost. Plans begin at $1,068 per year, and to get the full Holly AI experience, you must upgrade to their Premium plan, which costs $2,268.
However, for that price, you get access to what is arguably the best day trading software in the industry.
Intended for: Swing traders
The beauty of Mindful Trader is that you don't have to be constantly on alert for trade alerts.
The recommended swing trades take up to ten days to complete, so you can buy at any time during the trading day. That's an important benefit because most of us can't keep our eyes glued to the screen all day waiting for alerts to appear.
Eric Ferguson, the Mindful Trader founder, used statistical analysis to create an algorithm that alerts him — and you — to high-probability market movements. He incorporates stock, futures, and options trades. In 2021, he also added a stock equivalent to his futures trades, allowing you to replicate them even if you don't want to deal with futures trading.
When Eric executes a trade, he updates his website for logged-in subscribers, and you can do the same in your own brokerage account. Every day, he makes the vast majority of his trades within the first half hour of the markets opening, so you only need to check the site once. These aren't as time-sensitive as faster day trades as swing trades.
I also like how Mindful Trader's hypothetical returns are backtested. Eric's trading system would have generated a 143 percent annual return over the last 20 years. The year-by-year return breakdown can be found here.
I've been tracking Eric's trades for about nine months now. During that time, I've earned a 31.2 percent annualised return.
That doesn't mean you don't suffer losses every now and then. A string of losing trades is a stomach-churning experience for all traders. The median account drawdown in Eric's backtests was 28%.
That is not something to be taken lightly. I can personally attest to how disconcerting it is to go from thousands of dollars up for the month to thousands of dollars down in a matter of days.
Mindful Trader has a $47 monthly subscription fee. Although it is not cheap, it is less expensive than many competitors. And because the billing cycle is monthly, you can try it for a month or two and then cancel without losing money if you don't like the trading style.
Designed For: Traders of cryptocurrencies, futures, forex, and ordinary stocks
Pilot Trading features psychology-based AI algorithms that anticipate when asset prices will shift directions, beyond simply showcasing their current trends. To make trading even faster and easier, they connect directly to many brokerage accounts for in-app trading.
One feature that sets Pilot Trading apart is the breadth of assets it covers. Beyond stocks, they also include futures, forex, and cryptocurrency trends and anticipated swing points. And if you’re new to trading any of those assets, Pilot Trading offers a simulated paper trading account to practice.
Best of all, Pilot Trading foregoes the massive membership fees charged by many competitors. They charge a flat $19.95 per month, with access to all features. No upselling, no separate pricing for bells and whistles, just one affordable price for all users.
7. Warrior Trading
Designed For: Day traders
Warrior Trading excels at education, and that starts at the top with its founder Ross Cameron.
Cameron leads highly personal chat room discussions, audio feeds, and video feeds in real time. Subscribers can even see Cameron’s own trades in real time, along with the company’s other professional traders and educators.
To help new traders get started, Warrior Trading provides a series of free educational videos in addition to their premium education tools.
In a fun exercise, Cameron opened a publicly visible new account with only $500, and he lets subscribers watch as he grows it to a target of $1 million. In the first month alone, he grew it from $500 to more than $53,000.
Warrior Trading delivers a newsletter every day with a handful of stocks to watch that day. You can use their real-time scanner to track them and other stocks throughout the trading day and create SMS message alerts in addition to email alerts for timely trades. To build confidence, you can trade with fake money using their simulator.
All that personal attention costs a pretty penny. Warrior Trading’s Pro service charges a dizzying $5,997 per year, so it doesn’t exactly appeal to the mildly curious. Alternatively, you can try their Warrior Starter Course, but it’s not cheap either at $997 for the first month then an auto-renewed $197 per month thereafter. I also dislike that they don’t list the price on the sales page. But they have a strong reputation for results.
Designed For: Day traders
Another education-centric platform, Investors Underground provides more than 700 video lessons and guides. It hosts frequent webinars with plenty of question-and-answer sessions.
Investors Underground sends a daily newsletter with stock watchlists and game plans, so you come to the market prepared. When the bell rings to kick off the trading day, you can join other traders in the chatroom to compare notes, ask questions, and monitor real-time stock scanning and alerts.
Those stock alerts don’t include an SMS option however, a feature many day traders prefer to more passive email alerts.
Although far from cheap, Investors Underground memberships still clock in at under one-third of Warrior Trading’s fee. The service costs $1,897 per year, and you can optionally add access to its premium courses if you want to up your trading game. If you want to try it for a month, you can pay monthly at $297 per month.
According to Investors Underground, their customers remain happy to keep paying. They claim 91% of their subscribers report the membership to be a good value, and that 83% say their trading improved after they joined.
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