Investing always involves the risk of loss.
Paradoxically, investing is often most risky when it appears safest. This lesson of history led us to adopt a rather unconventional strategy – a contrarian approach to investing. We believe our approach has great merit. But as you surely have heard before, the past isn’t necessarily a guide to the future. No matter how well we do our job, no matter how much research we conduct, no matter how promising the opportunity, or certain our analyst… you cannot escape the fact that every investment opportunity comes with the risk of a loss. These risks are part of the reason why great investment ideas are rare and incredibly valuable. You should understand why a business – like ours – would be willing to allow member investments. We’ve prepared this document to help you understand exactly why we publish our best investment ideas. It will describe our posture in regards to guarantees and refunds. It will explain the regulatory and legal framework that governs how we operate and perhaps most important, it will set the stage for a long and happy business relationship. We’ve been successful in this business over many years because we’re dedicated to serving our subscribers by only publishing materials we’d want our own families to read and follow, by always being completely transparent about the utility of our products (track records), and by always considering how we’d want to be treated if the roles were reversed. If you’ll take the time to read this document, we believe you will be far more likely to succeed using our materials. You will know more about our approach to serving investors. You’ll know more about the limits of what we can help you achieve. And most of all, you will know a lot more about the risks you inevitably face as an investor.
The first thing to know about our business (Brown Investment Group) is that we are NOT money managers, brokers, or fiduciaries of any kind.
Our published work is NOT a low-price replacement for an experienced money manager, broker, or investment advisor. Instead, Brown Investment Club LLC is a publishing company and the indicators, strategies, reports, articles, and all other features of our products are provided for informational and educational purposes only. Under no circumstances should you construe anything that appears in our newsletters, reports, or on our website as personalized investment advice. Our recommendations and analysis are based on Securities and Exchange Commission (SEC) filings, current events, interviews, corporate press releases, and what we’ve learned as financial journalists. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. If you are not an experienced investor, we urge you to get as much education as possible and to consult a licensed individual advisor before making investments of any kind. The regulatory regime for investment advisors and money managers makes it difficult (if not impossible) to serve both the general public and individuals. We have chosen to provide our research to the general public for a number of good reasons. For one, we know that Wall Street has enjoyed a dramatic advantage over the average investor for decades. And we want to level the playing field as much as possible. But the most important reason for serving the general public relates to something called the “prudent man” rule. Historically, the best investment opportunities have arisen amid circumstances most investors believed were risky. For example, opportunities to buy large-cap U.S. stocks at attractive prices have occurred almost exclusively during periods of great economic uncertainty. Recently such opportunities arose in 1987, 1994, 1998, 2002, and 2008. We are confident that such opportunities will occur again. Excessive greed and fear are the emotions that drive the public markets. Likewise, individual securities often trade at the most attractive prices when serious problems arise in a given business. We call these company-specific problems “warts.” However, precisely because most investors are repulsed by such securities, investors willing to study them can produce large investment returns. We seek to take advantage of these opportunities for the benefit of our subscribers.
Our company’s primary approach to investing is based in contrarian strategies that may be significantly at odds with conventional wisdom and mainstream approaches to capital management.
That means many of the recommendations and strategies we cover in our publications will seem risky and controversial. We urge you to consider our investment ideas carefully and to follow all of our strategies for risk management, especially position sizing and trailing stop losses. But most of all… we urge you to educate yourself about the philosophy that underlies our approach. If you will take the time to understand why we believe our strategies are likely to work, you can acquire the emotional fortitude and the discipline necessary to successfully apply our strategies. If you lack this understanding, you are very unlikely to succeed.
We are NOT responsible for your results – good or bad. We will NOT take credit (in the form of a percentage of your profits) for your success. Nor are we legally liable for any of your losses.
Subscribing to our newsletters will not make us responsible for your investment results. You will bear the full burden of the risks you decide to take. As we will regularly remind you: It’s your money, and it’s your responsibility. Our lack of fiduciary responsibility might cause you to second-guess our work. That’s fine with us. We urge you to be critical and skeptical of all investment recommendations, no matter the source. But the simple fact is, if we were subject to legal liability for any losses resulting from our recommendations, our business would disappear overnight. No investment manager could withstand the risk of investment losses without also reaping the rewards of investment gains. Being free of these fiduciary obligations allows us the freedom to operate and to provide information about investment strategies (contrarian) and investment ideas that others are not able or willing to cover. Therefore, when you use our services remember to always limit your position sizes to an amount you can easily afford to lose. (We’d recommend the same advice when making an investment based on a recommendation from any source.)
A very important warning: We make mistakes.
We are human. We make mistakes. Sometimes our ideas and hunches turn out to be wrong . More frequently our “timing” is off. That is, an investment theme we expect to develop only does so in a timeframe that makes it difficult to earn a profit. And of course, there are also times when we are misled, despite reasonable efforts to confirm our sources. When we make mistakes, you can count on us to correct them as quickly and honestly as possible. It is very unlikely (though it does happen from time to time) that you will become wealthy from trading stocks, bonds, options, commodities, or other financial instruments. The most realistic way to become wealthy, in our view, is by building your own business or by playing a key role in the creation or the significant growth of an existing one. Our newsletters are intended to serve people who are in the process of wealth building by helping them manage their savings or people who already have significant amounts of savings earn a higher average return.
Why not simply manage money or keep our ideas for ourselves?
Most knowledgeable investors are willing to share their ideas with other investors in exchange for a fee. Sharing ideas doesn’t reduce returns and can generate substantial amounts of income for good investors. Fees for top-quality money managers are high – especially for investors who are able to pursue contrarian strategies. Hedge funds, for example, typically charge 2% of assets under management and 20% of profits. Fees generated by successful hedge funds can reach into billions of dollars. While we have considered for many years launching such a fund, the regulatory burden and the cost of raising large amounts of capital, are significant. On the other hand, thanks to the First Amendment, there are relatively few legal burdens to publishing and thanks to the Internet, there are few capital constraints. These low barriers to entry allowed us to achieve a significant amount of success very quickly. Our path to success was set in motion by a simple choice: We decided to publish our investment ideas to millions of people around the world at a relatively low price rather than sharing our ideas exclusively with a very small group of wealthy investors at a high price. In the long term, for this approach to be successful, we must continue to provide large numbers of subscribers with unique, contrarian investment advice that is reliable and profitable.
We have structured our business in an effort to avoid conflicts of interest, but a significant potential conflict of interest still exists.
We believe everyone involved in finance has some conflict of interest. Hedge-fund managers, for example have a tremendous incentive to produce short-term capital gains so that they can generate fee income (20% of gains). This might lead them to take short-term risks at the expense of safer and more lucrative long-term gains. This conflict will exist even if the manager keeps all or most of his wealth inside the fund. It also helps explain why successful hedge-fund managers often end up earning far more from running the fund than their clients make investing in it. We generate our profits exclusively from the subscriptions we sell. This is deliberate. We do not want our subscribers to wonder whether we were recommending a company or an investment because the company or investment sponsor advertised with us. This has been one of the ways that we have steered clear of potential conflicts of interest but it’s not the only one.
We offer one of the most generous refund policies in our industry… and perhaps in the world.
More so than any other business we can name, we believe in “parting as friends.” If we cannot meet your expectations, you should always have the opportunity to call us on the phone, tell us how we’ve failed you, and get your money back. That is why, since the first day of our operations, we have always maintained in-house customer service, hiring bright, and dedicated young people and employing them in our headquarter buildings. They work in the same building as our senior executives and our owners. Whatever the purpose of your call, it will be answered promptly and handled professionally. Our wait times are normally less than one minute. And our average call duration is less than five minutes. We are open for business (on the phone for customer service) from Monday through Friday, 9 a.m. through 5 p.m. Eastern time. Our phone number is: 1-888-261-2693.
Why our business model is almost exclusively based on subscriptions.
You may have noticed that the vast majority of our products are offered only via subscription. To protect free speech and to encourage public debate and the exchange of ideas, the SEC has carved out what’s known as the “publisher’s exemption” from certain securities laws. This exemption doesn’t mean that we can write whatever we want. It means that we aren’t required to be registered with the SEC. And it means that we can write about things registered advisors would find difficult to get through their compliance departments – such as extremely contrarian advice. To qualify for this exemption from securities licensing (and avoid the “prudent man” restrictions we mentioned earlier), we must be a “bona fide” publisher, which under law is defined as a publisher who offers commentary to the public on a regular schedule via subscription. The SEC frowns on “tip sheets” that sell one-off reports. These policies help create accountability for publishers. If we aren’t able to live up to our promises and the expectations we set, our clients have the right to demand a refund. And that’s why we’ve always had such a liberal and generous refund policy. We have no problem proving our value to subscribers. It’s exactly how we’d want to be treated if our roles were reversed.