Guide to personal finance magazines – Part 2

Personal finance magazines endured a shakeout during the dot-com bust in the early 2000s, and only the strongest have survived today. These magazines provide some valuable basic financial planning information, but, unfortunately, they also are larded with misleading information that can lead a person astray. Separating the wheat from the chaff is a fairly easy task, if you know where to look.

The basic problem with mass-market personal finance magazines is that they are dependent on advertising. The magazines therefore have a huge incentive not to criticize the products and services in those ads. And since many of those ads are for insurance, mutual funds, stock-picking services, etc., the reader of the magazines should be very wary about articles that extoll the benefits of those same products and services.

The value of personal finance magazines is in the general information, rather than the specific selections. In other words, the headline on the cover that shouts “FIVE STOCKS YOU NEED TO OWN RIGHT NOW!” is wrong. It is surely written about stocks that have doubled in value in the last year, and thus have already been discovered by Wall Street professionals. A buyer of those stocks at this point will have lost the opportunity to double the price and will almost surely buy an under-performer. In fact, numerous academic studies have shown exactly that trend; stocks that are at the bottom of performance in one year will as a group outperform the stocks that were at the top. This makes sense, if you think about it. Companies at the bottom of the pile will have to work harder and be more innovative to turn things around; some of those companies develop a new strategy, and they are rewarded for it. The companies at the top get cautious because they are protecting what they’ve already built.

So, ignore the headlines on the cover of the magazines about hot investment sectors and can’t-miss investment ideas. Focus instead on the articles about general strategies, and read the interviews with real people who share how they are trying to manage their own finances. These stories will yield basic ideals that you can adopt – ideas for saving, long-term investing, how to be eligible for another tax deduction, etc.

Here’s a quick rundown of the primary monthly personal finance magazines on the market today. A subscription to each can be obtained for about $10/year by using a coupon.

Kiplinger’s. The best of the pack. It has ideas that can be realistically implemented,