For investors, choosing where you get your research is a critical step to making sound investment decisions. It is estimated that over 18,000 financial institutions offer financial research, not including thousands of TV stations, websites, and podcasts covering financial news.
Zacks Investment Research is one of the largest providers of equity research, covering individual stocks, ETFs, and Mutual Funds. Zacks has continually ranked among the top firms in the United States according to individual evaluators of stock market research.
We produced a list of the 8 Best Stock Research Websites, which highlighted the value that Zacks Investment Research, but it also compared it with eight other providers. There is no shortage of financial news and information and narrowing your search to the best sources is an important step for any individual investor.
However, is paying for Zacks Investment Research a good investment for everyone?
Zacks was founded in 1978 by an MIT Economist, Len Zacks. In the 1970s, Zacks discovered that stock performance seemed to be correlated to analysts' earnings estimate revisions. He postulated that if analyst revised their estimates higher, the stock would do well, and when they revised them lower, the stock was a sell.
In 1978, armed with a Ph.D., Zacks founded Zacks Investment Research, Inc. Based on the principles of earning estimate revisions, Zacks built the Zacks #1 Rank List which — according to the Zacks website — has managed to generate returns of 25%, more than double the S&P 500.
In April 2022, we performed an in-depth Zacks Investment Research Review if you want to read a full review of their services.
The first question an individual investor needs to evaluate is the cost. Every investment carries some risk, and every financial investment has a cost associated with it. You can view our comparison between Zacks and The Motley Fool, which has an in-depth breakdown of the costs if you want to compare Zacks Investment Research costs to other services.
Zacks Investment Research offers a free membership level that gives you access to Zacks daily newsletter, and Zacks Portfolio Trackers, among many other benefits. However, if you are serious about getting research you will want to consider a paid option.
Zacks Investment Research offers three different options to choose from:
For more information about the free membership and a full breakdown of what each membership level provides, you can read the Zacks Investment Research Review on Tech Bullion.
Individual Investors should consider costs carefully. After all, every dollar they spend on market research is a dollar that you cannot invest in the stock market. Thus, you can not benefit from the annual compounding for years into the future. 25% annual returns should compensate for the additional cost of the service.
However, there is another factor to consider.
According to the Federal Reserve's Survey of Consumer Finances in 2019, the average American held $40,000 in stocks. If you have $1,000 invested in your account, paying $2,995 per year would not be worth the investment.
However, if you have something closer to $100,000 in your account, this investment might be well worth it. If — in theory — you improve your investment returns by 15% (25% instead of 10%), you would be boosting your capital by $15,000 each year. Allowing that money to compound over decades could have a sizeable impact on your net worth.
Most individual investors want to outperform the market. It is a natural human tendency to search for superior returns. One way to do that is by selecting a research firm to help you make high-quality investment decisions.
However, when it comes to finances, everything comes down to your personal preferences. Will you have time to utilize Zacks Investment Research? How long is your investment time horizon? Are you investing for fun or to support your retirement? Why are you trying to outperform the general stock market?
For some investors, the answer to these questions will make it more advantageous to buy an Index Fund and let their money compound for years. Warren Buffett has often given advice for individual investors to simply buy a low-cost S&P 500 Index Fund and let it compound for decades.
However, for other individual investors, paying for research may be incredibly lucrative. If you can utilize the research, you have the time to research individual stocks. If you use bear markets, paying for research may lead you to superior returns. However, it all comes down to your individual goals as an investor.
Tim Mauer is the Head of Wealth Management for Triad Financial Advisors and is the author of the book Simple Money. He has regularly been quoted saying, “Personal finance is more personal than it is finance”.
If you would like to sign up for Zacks Investment Research, use this link to get started.