The Motley Fool is a stock picking service that is quite likely familiar to most investors that have spent any amount of time researching the best online tools to help them become stronger.
Famous for its urgent alerts and bulletins to subscribers, The Motley Fool has been operating since 1993 and accumulated a good track record of success. It is a good weapon in the arsenal of new and experienced investors alike who are looking to improve their stock market returns. If you are completely unfamiliar, this Motley Fool review will do a good job of setting the stage.
The Motley Fool Overview: Bring Stock Picks Right to You
A good place to start in terms of understanding The Motley Fool is that there are actually two different services available to users. One is called The Motley Fool Stock Advisor and the other is Rule Breakers.
The core of both is essentially the same: users are sent 12 stock picks per year or about one per month. Generally speaking, both services have provided good returns historically however there are some small nuances that need to be highlighted and properly understood. It’s worth looking at a detailed breakdown of the similarities and differences between the two offerings.
As the names strongly imply, Stock Advisors is a more conventional service, recommending companies with well-established track records and that are in relative terms lower risk. Rule Breakers, well, breaks those rules, and focuses on newer, less established companies that carry the potential for higher returns – but also the risk of greater losses. As Rule Breakers steps a little outside the box, it has been reviewed separately elsewhere.
Given that there is no shortage of options when it comes to online investment advice and stock picking suggestions, it’s important to pause and consider whether or not The Motley Fool delivers results that warrant a closer look. Here, the answer is to consider it further: since its inception, its picks have produced positive returns in the vast majority of years. Impressively, it has produced returns of greater than 20% in 19 years and losses of greater than 20% in only three years.
It’s that historical picture that helps to inform how The Motley Fool’s advice should fit into your investing strategy. It is not the place to get ideas for day trading. It may require holding for a period of time to see success. The point is, history is on the side of Motley Fool’s picks and most patient investors will eventually reap positive returns.
Stock Advisor vs. Rule Breakers
It is important to remember that average returns are based on all of The Motley Fool’s stock picks in a given year. That’s to say, in order to increase your likelihood of seeing those averages reflected in your own portfolio, you would need to purchase each individual stock that they recommend. Some may have the cash for that, but others – especially newer investors – understandably may not.
Here’s where it requires some careful consideration of risk before deciding on Stock Advisor vs Rule Breakers. Stock Advisor picks better-known stocks that have a more established history and are therefore somewhat more predictable. This means that if you end up choosing individual stocks to buy from their recommended 12, your likelihood of running into a big loser is somewhat diminished. Of course, so are your chances of finding a big winner and enjoying better-than-average returns. With Rule Breakers, the opposite is true – any sampling of their 12 picks has a greater chance of higher volatility, meaning that both gains and losses could be larger.
If you’re planning to subscribe to The Motley Fool and make individual stock picks, you will need to reflect on your risk tolerance as well as your experience and understanding of financial markets. To minimize risk, Stock Advisors may be the best starting point. But if you have the cash to follow most of their picks, some tolerance for risk, and are confident you have done your due diligence, Rule Breakers can be well worth it.
If Stock Advisor is the direction you decide to go, there’s a great deal on now that gets you your first year for $89, a steep discount off the regular price of $199/year.
Final Thoughts
You won’t make it far into your online investing career or hobby without discovering The Motley Fool, so you may as well familiarize yourself with it now. It has been around for a long time and has a track record back it up. New investors will do very well to consider it as a stock picking service, and with careful attention to the differences between The Motley Fool Stock Advisor vs Rule Breakers, you can position yourself for success in the years ahead.
Jeremy Biberdorf is a long-time internet marketing pro turned online entrepreneur and blogger. Check out his investing blog at Modest Money.
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