If you invest in single stocks, it’s not always easy to pick the next winner. The Motley Fool is a well-respected stock picking service with a nearly 30-year track record. According to The Motley Fool website, it has far outpaced the S&P 500. The stock advisor service claims to have beaten that key market index by a factor of four over the last 17 years. Let’s take a look at the costs, how it works, and if it makes sense for your investment needs.
What Is The Motley Fool Stock Advisor?
The Motley Fool is a stock and investment website. It employs many writers and analysts who are constantly combing the market for stock picks and investment ideas. The flagship product for investors is the Motley Fool Stock Advisor service. This paid service gives you access to a more exclusive list of stocks.
- Customers get two new stock picks per month.
- Subscriptions cost $99 for the first year (for new members) and then $199 per year going forward.
- You can try it risk-free for the first 30 days and then cancel for a full refund if you’re not satisfied.
- At any given time, Stock Advisor customers have access to about 10 recommended stocks.
The Motley Fool: “Our Portfolios Gets Higher Gains than Competitors”
The company claims that the portfolios of the founders have returned higher gains than the S&P 500.
- Tom Gardner’s stocks have returned an average of 201.8%.
- David Gardner’s stocks have returned an average of 670.6%.
These contrast with a 92.7% average for the major S&P market benchmark (as of this writing). The site generally maintains a lighthearted attitude, as reflected in its subscription newsletter and other services. However, the Motley Fool Stock Advisor service is generally well respected in the investment community.
For investors willing to take a bit more risk, the pricier Rule Breakers subscription costs $299 per year and focuses on growth stocks. The Fool also offers retirement guidance and resources in its Rule Your Retirement subscription for $99 per year, but this review focuses primarily on the Stock Advisor subscription.
Who Should Subscribe to The Motley FoolStock Advisor?
The Motley Fool is best for people who are interested in semi-active trading.
If you are a brand new investor or want to learn more about picking individual stocks instead of exchange-traded funds (ETFs) or mutual funds, this service is an excellent resource with a reasonable price tag.
When I dropped in for the first time, I saw a list of stocks that I was most familiar with, and a few that were new to me. But I probably know more companies than the average person, since I’m a finance writer. Of the 11 stocks presented, I had actually considered two of the stocks myself at different times.
Expert investors who like finding their own stocks and passive investors who prefer to buy and hold diverse funds should skip this service.
History of The Motley Fool Stock Advisor
Brothers David Gardner and Tom Gardner founded The Motley Fool in 1993. The Gardners still run the company from its headquarters in Alexandria, Virginia, in the Washington, D.C., area.
The original online launch led to widespread coverage, including by The Wall Street Journal and The New Yorker, and a partnership with then-booming America Online. It did well in the early ’90s. But the company suffered significant losses in the fallout of the dot-com market collapse in 2001.
In the years since, however, the company re-found its footing and expanded to include its own public blog, podcast, and video content, in addition to the Stock Advisor, Rule Breakers (here’s how they compare), and Rule Your Retirement subscriptions.
Biases and Controversies
While The Motley Fool Stock Advisor customers who have followed its advice perfectly since inception have done very well, it hasn’t always performed well. The dot-com bubble was so bad for The Fool that it ended up laying off 80% of its staff and closing multiple offices.
During this period, The Motley Fool espoused an idea called “The Foolish Four.” This hypothesized that a well-constructed portfolio of just four Dow Jones Industrial Average stocks could beat the markets in the long term. Clearly, this isn’t a great strategy, which The Motley Fool has since accepted.
On both the free site and within the paid subscription service, marketing and upselling are very in-your-face. This may deter some potential users.
What to Look for in The Motley Fool
Subscribers should look for the two big stock recommendations from Tom and David each month. Also, the brothers share their recommended “Best Buys” that could help fill out your portfolio. At the time the screenshot below was taken, there were 11 stocks listed on the buy list. New recommendations come out every Thursday.
Is Motley Fool Worth It?
As you can tell from this review, we are pretty positive about The Motley Fool. I’ve tried some competing newsletters and services that cost more than double. Motley Fool offers a good balance of interesting investment ideas at a reasonable rate, making it a good value for investors of all skill levels.
Beginner to intermediate investors can learn a lot from reading the details behind each stock pick. More experienced investors can use that information as fodder when making investment decisions of their own.
I have experience managing part of a university endowment fund and seven-figure portfolios, and I have a few stocks from The Motley Fool in my own portfolio. Some are doing great. Some are doing so-so. But on average, they have done well enough to pay for the subscription cost and leave me with a nice little profit.
Why am I talking about myself here? If someone like me with two finance degrees, portfolio management experience, and all day to sit on the computer thinking about money found value from The Motley Fool, you will likely find it worthwhile as well.
Is the Motley Fool Safe and Legitimate?
The pushy advertising style at Motley Fool sometimes makes it feel like a used car lot, but overall The Motley Fool is a safe and legitimate investing service. I’m a subscriber myself and have been very happy with the service overall.
If you read all of the newsletter and investor education content, they even go so far as to admit that some of their investments won’t work out as planned. They proudly show off their winners but don’t hide their losers. I wouldn’t follow their portfolios exactly, but their recommendations are a good data point in building your own investment strategy around individual stocks.
Some have gone so far as to question: Is Motley Fool a pump and dump scheme? A pump and dump scheme is when someone attempts to boost the price of a stock based on false, misleading, and often exaggerated statements.
The Motley Fool is definitely not a pump and dump scheme. It is a respected investor newsletter and they provide links to their research. While its large subscriber base may influence stock prices immediately after announcements, leading to some opportunities for market manipulation, The Motley Fool itself operates on the up-and-up. If you want to learn more about pump and dump schemes, check out movies like Boiler Room or The Wolf of Wall Street.
The Motley Fool Stock Advisor Pros & Cons
- Weekly stock recommendations with expert analysis. Get a weekly stock pick from a market expert with a proven track record.
- Relatively affordable annual cost compared to some investment newsletters. The service for new members is $99 for the first year and $199 for future years. That translates to $8.25 per month for the first year and $16.58 per month in future years.
- Text and email alerts give you quick information. Opt-in for alerts via email and text message, so you don’t miss an announcement.
- Upsales. The site is heavy on sales and uses strong marketing language to try to sell you additional subscriptions.
- No stock recommendation is guaranteed. While The Motley Fool team has outperformed the markets overall, not every stock they suggest is a winner.
- Recommendations can move the market. Stock prices can temporarily spike after the newsletter comes out, which might lead you to buy at a higher price if you’re not careful.
Final Thoughts on The Motley Fool Stock Advisor
Most investors shouldn’t put their entire portfolio into the suggestions of any single stock picking service (It’s better to learn how to invest in stocks). However, among stock subscriptions, this service has a good reputation and a strong track record of success.
In my opinion, the stocks in the current portfolio as of this writing are logical and sound. There’s never any guarantee of future performance, of course, but the advisor tends to do well overall.
If you’re up for a subscription service that costs $199 per year, the introductory deal is an excellent way to test the waters. With a lower $99 fee (for new members) for the first year and the 30-day refund policy, you can take a risk-free look behind the scenes to decide if it’s right for you.