What is an Advisory Letter?

Malcolm Tatum
Malcolm Tatum

Also known as an advisory newsletter, an advisory letter is a financial advice publication that seeks to provide sound financial information and advice to its subscribers. The exact focus of the letter may be somewhat narrow, with special attention granted to a specific market or a particular type of investment. An advisory letter may also cover the general topic of investments, making note of trends and events taking place with various stocks, bonds, and commodities.

Man climbing a rope
Man climbing a rope

Financial newsletters of this type are sometimes focused on the events connected with a specific investment. For example, the publication may provide investors associated with a given mutual fund or bond issue updates on events surrounding the performance of that investment. It is not unusual for the text of each issue to also include commentary from the editors and publishers of the letter, as well as quotations and references from recognized analysts and other financial experts that are not directly connected with the fund.

Depending on the type of content provided in a given advisory letter, the editors may be required to comply with regulations put in place by a governmental regulatory agency. This is particularly true if the text of the letter includes recommendations regarding specific securities. Since laws regarding this type of counsel vary from one nation to another, this type of compliance may or may not be required. In any event, letters that do comply with regulatory standards often note that compliance within the masthead or the text of the newsletter.

An advisory newsletter may also concentrate on investment opportunities related to a particular industry or market segment. The subject matter may have to do with what is happening in the retail industry, noting the current trends in consumer demand, and how that demand is impacting the value of stocks issued by major players in that industry. With industries that are driven by continuing developments in technology, such as the telecommunications field, the text of the letter may include market commentary that includes projections of how newly released services and products will impact investments related to the major telecom providers and equipment manufacturers.

In all its incarnations, the main purpose of an advisory letter is to offer suggestions and advice to investors, based on data that the editors have researched and found to be accurate. From this perspective, the goal is to not only inform investors on what is happening within the scope of the portion of the market covered by the letter, but also to offer responsible interpretation of events and give readers suggestions on how to make the most of those events. As with any type of informational resources, investors should conduct their own research into the conclusions drawn in an advisory letter, then determine what action to take, if any, regarding the suggestions or counsel.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including wiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

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