There’s no argument about The Motley Fool’s success. Over the last 30 years, their stock recommendation service has had more influence over the retail investor community than any other.
Their empire has reached all sectors of the media: Publishing, newspapers, podcasts, and their website. And they’ve achieved all their success in an honorable, honest, and entertaining way.
Stock-picking services are judged by their accuracy and profitability. The Motley Fool faces this scrutiny more than others because of their popularity. Because it’s a question of personal finances, it’s fair to ask, “Is The Motley Fool legit?”
Today, we’ll take a closer look at the service to decide: Is Motley Fool worth it?
What Is The Motley Fool? A Brief History
What is the Motley Fool? It traces its beginnings back to 1993. Brothers David and Tom Gardner had been investing in the stock market since they were in their late teens. Both graduated from universities, but never had formal training or education in financial matters.
David began publishing an investment newsletter in 1993. It wasn’t a huge success until Tom began promoting it on America Online (AOL) in 1994. This was right at the onset of the internet revolution. The Gardners quickly understood that this new media format was tailor-made for their services and that AOL was leading the charge. They launched the Motley Fool AOL site in August 1994. Three years later, they moved to their own domain, Fool.com.
During this time, The Motley Fool operated out of a shed behind David’s house in Alexandria, Virginia. Their operations expanded. Their weekly investment insights were syndicated to newspapers across the world. In 1996, their book The Motley Fool Investment Guide became a New York Times bestseller.
Despite their success, The Motley Fool stirred up a little controversy amongst the old-guard financial set. Named after an Elizabethan court jester from Shakespeare’s As You Like It, the Gardner brothers appeared on book covers and publicity shots wearing a jester’s cap. Traditional Wall Street types thought they were nothing more than scruffy types in their 20s offering questionable investment advice.
Not every strategy that The Motley Fool promoted was a smashing success. Their “Foolish Four” method, devised in the late 1990s, focused on low-price, high-dividend stocks. While returns were net-positive, the Motley Fool later admitted they were not as sky-high as they’d originally predicted. However, they were quick to correct their original claims, and their followers were undeterred.
The Motley Fool switched over to a subscription model in 2002. They introduced their online Stock Advisor service, the cornerstone of their brand that remains in existence today. They’ve launched a few other advisory branches as well, including Rule Breakers, focusing on high-growth stocks, and Rule Your Retirement for late-life financial planning.
In the last few years, The Motley Fool has introduced two new services: The Ascent, a personal finance product review site, and the real estate-focused brand, Millionaires. They maintain offices in Europe, Australia, Japan, and Canada.
Services It Provides
The Motley Fool offers a handful of tools for investors looking to boost their portfolio returns and beat the stock market indexes. They provide some services, like news reports, free of charge. Their stock picks and advanced advisory services are available for premium subscribers. Here’s an outline of their services.
Motley Fool Stock Advisor
The Stock Advisor is the core service provided by The Motley Fool. Every month, the team issues two recommendations for stocks they expect to grow over the long term.
Picks on the Stock Advisor include a few labeled as “Best Buys Now.” The Gardners believe these picks are current bargains expected to thrive. They base their decision on three to five year projections, so the suggestion is to buy shares now and hold on to them for that time.
Every pick on Stock Advisor is accompanied by an extensive explanation. The two monthly recommendations come with very in-depth reasoning as to why the Gardners feel it’s a promising prospect. They factor in recent developments, news articles, market conditions, pending deals, and potential risks.
Stock Advisor is geared toward those who are early into their investment career — not necessarily brand spanking new investors, but some with a little experience. They also offer a set of 10 “starter stocks” to build a new portfolio with, advising to add at least three of them. The Motley Fool recommends every portfolio should have at least 15 stocks in it. That’s a good suggestion, but it could go even higher.
Rule Breakers
Like Stock Advisor, The Motley Fool’s Rule Breakers provides two stock recommendations a month and a set of starter socks. It also suggests five “Best Buys Now.” However, Rule Breakers focuses on high-growth stocks. These are different from the more pragmatic investment strategies of Stock Advisor.
Rule Breakers’ experts look for companies that are positioned for breakthroughs. They lean toward innovators such as tech disruptors who expect to provide big returns relatively quickly.
This makes Rule Breakers’ picks a little riskier. Stock Advisor favors long-term strategies, expressly recommending that investors hold on to their shares for a few years. Rule Breakers is not geared toward the buy-and-hold type. Their stock picks are expected to turn profits more dramatically and swiftly. This investment style caters to those who can stomach market fluctuations and high-risk stocks.
Rule Your Retirement
Rule Your Retirement is The Motley Fool’s guide specifically for retirement planning. It doesn’t offer stock picks like Stock Advisor or Rule Breakers. Instead, it focuses on structuring investments for retirement, mutual funds and ETFs, Social Security, budget and debt management, and other advice. Most of the information on Rule Your Retirement comes in the form of its 1,000+ articles.
Other Services
The Motley Fool offers quite a few advisory services that are more finely tuned to different investment styles and strategies. Some of them are classified under the heading “Discovery.” This series focuses on various portfolio strategies, such as IPO investing, cloud disruptors, international companies, and more. There’s also a Discovery platform focusing on Tom Gardner’s portfolio.
There are also eight services under the heading “Extreme Opportunities.” These are hyper-focused on emerging industries, like 5G, augmented reality, cannabis, and more. Both the Discovery and Extreme Opportunities segments are significantly more expensive than Stock Advisor, Rule Breakers, and Rule Your Retirement.
The Motley Fool also offers other typical stock website services, such as a screener, a stock simulator, a diversification assistant, and lots of research tools. There are also links to the very active Motley Fool community and original podcasts.
Is The Motley Fool Legit? How They Operate
The Motley Fool’s mission isn’t too complicated. They assert on their website that their “purpose is to make the world smarter, happier, and richer.” They back away from making overstated expectations for the most part. And you can’t help but be entertained by their presentation. They don’t take themselves too seriously, even given the relative weight of the personal finance topics they cover.
With Stock Advisor and Rule Breakers, everything hinges on Thursdays. That’s when the Gardner brothers make their stock suggestions every week. These announcements can have an immediate impact on the stocks they pick. Because The Motley Fool is a popular service, you might see an uptick in trading volume on the stocks they recommend in the hours after they’re published.
The Motley Fool thrives on collaboration with its community. Their online forum is open and welcoming. Their disclaimer admits that some of the information they assess comes from unverified parties, some of whom may not be entirely trustworthy.
The Motley Fool handles this reality of cyberspace responsibly: “The fundamental concept is that you should NOT rely upon the information or opinions you read. Rather, you should use what you read here as starting points for doing independent research on companies and investing techniques. Then judge for yourself the merits of the material that has been shared in our forum.”
That’s the most important point about The Motley Fool: They’re a jumping-off point. Especially if you’re considering one of their “buy-and-hold” recommendations, it’s best to do some detective work on your own before you execute a transaction.
Many of their “hottest” recommendations fly in the face of the investment brokerage establishment. If you look up the stock ticker for a Motley Fool pick on Fidelity or Yahoo! Finance, you might find other analyst recommendations to hold or sell the stock. This is the nature of growth investing, though. You’re going to be taking risks no matter what. The Motley Fool, for its part, defends its strategy as articulately as it can.
Is the Motley Fool Legit? Their Track Record
An evaluation of The Motley Fool’s success depends on two factors: How one measures success and whether their subscribers actually follow their recommendations.
It’s impossible to account for the latter factor across the board, of course. But Wall Street Survivor has tried following Stock Advisor’s recommendations to the letter over the last couple of years. They’re happy with their performance. In 2020 — a wild year in the stock market for obvious reasons — they cited a return of 77% on the average Motley Fool pick, with 20 of their 24 picks being “profitable.”
As far as their historical performance is concerned, The Motley Fool advertises that, as of April 6, 2021, their Stock Advisor portfolio has returned 565% since its 2002 inception. That’s a hefty return compared to the S&P 500’s 124% growth over the same time. Interestingly, their Rule Breakers high-growth picks have returned significantly less than Stock Advisor’s, but they’re still decent: 314% since Rule Breakers’ 2004 launch.
Is Motley Fool Worth It? How Much They Charge
Now for the real bottom line: How much does The Motley Fool charge for its services? Is Motley Fool worth it?
An annual subscription to The Motley Fool’s Stock Advisor costs $199. The more volatile Rule Breakers will set you back $299 a year. First-time subscribers are usually given a discount on the first year of using either service; The Motley Fool typically charges $99 to a new subscriber.
They also offer a head-scratching “bundle” with both Stock Advisor and Rule Breakers for $498 — a discount of exactly nothing. What’s the point of a “bundle” without a discount? Even a modest one, say 10% to 15%, would make it attractive to new users.
You’ll get a full year of advice and stock picks for those services. You’ll also get upselling — lots of it. The Motley Fool isn’t shy about urging you to upgrade and subscribe to multiple pillars at once. There will be emails. There will be many emails. True, that’s part and parcel of online business. But it’s a typical complaint Fool users often express.
Rule Your Retirement is available for $149 a year, but as mentioned, it offers no stock picking services. Subscriptions for The Motley Fool’s advanced products, like Discovery and Extreme Opportunity, run in the four-digit range. That makes them virtually inaccessible for the retail investors that need The Motley Fool the most; they’re only for high-income investors.
The Final Verdict
Is The Motley Fool legit? We’ll be honest: Yes. They’re not fraudsters or hucksters. They’re honest about what they do and forthcoming about the risk involved. Their information and reportage are pretty solid. You have to respect what the Gardner brothers have built over the last three decades and how they’ve accomplished it.
But is Motley Fool worth it? That depends on what you’re looking for. Their Stock Advisor service is predicated on long-term holdings over 3 to 5 years. Rule Breakers has more of a short-term approach, but it still advises a buy-and-hold strategy. But they don’t issue precise timelines or price points to sell shares for more active investors.
As to selling recommendations, The Motley Fool advises: “Our buy recommendations include a section titled, ‘Risks and When We’d Sell.’ As a general rule, our premium services will include a buy-and-hold timeline (or reasons why a “buy” would become a “sell”) in the ‘About’ or ‘Guidebook’ section of the service. With that being said, you are in charge of your own portfolio’s holdings and the decision to sell is completely up to you.”
So if you’re looking for more guided, short-term, aggressive stock market advice, that’s just not what Stock Advisor and Rule Breakers are all about. The Motley Fool is upfront about that. Its Discovery and Extreme Opportunities are for more active traders, but their annual subscription rates are prohibitively expensive for common investors.
As with any service, including The Motley Fool, weigh your priorities with the expenses involved in keeping up with their recommendations.
Gorilla Trades: The Active Trader’s Option
What is the Motley Fool? It’s a reasonable choice for investors looking for long-term gains. Gorilla Trades is for investors looking for detailed, data-driven recommendations on when to get into promising positions and sell for solid gains, regularly and dependably. Sign up for a free, no-risk trial to learn more.
Source: https://www.gorillatrades.com/the-motley-fool-worth-the-money/
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