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 just about any other.
Stock-picking services are judged by their accuracy and profitability, however. 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 or are there better options out there?
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 more than 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.
And it’s true that 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.
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.
What Is The Motley Fool? 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. However, their stock picks and advanced advisory services are available for premium subscribers only, which can get a little bit more expensive.
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. This can be problematic for investors that are looking to trade more actively.
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 most companies would suggest a higher limit.
Is Stock Advisor worth it? For some investors, maybe. But other options, like Gorilla Trades, may be a better fit for a wider range of traders, including experienced investors, novices, and for traders who want greater activity.
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. Rule Breakers is not geared toward the buy-and-hold type. Their stock picks are touted to turn profits more dramatically and swiftly. This investment style caters to those who can stomach market fluctuations and high-risk stocks.
But is it truly the best strategy for investors? While many companies claim that they can spot breakthrough stock options, it may be better to partner with a provider that offers a data-driven guide for 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.
The Motley Fool offers several other advisory services. Some of them are classified under the heading “Discovery.” This series focuses on 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.
However, it’s easy for the dollars to add up when users are trying to figure out which strategies they want to pursue. For newer investors in particular, the strategies that are supported on The Motley Fool may encourage riskier practices that are…well…foolish.
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. Perhaps you’ll even be entertained by their presentation. They don’t take themselves too seriously — and it can feel overly casual, given the relative weight of the personal finance topics they cover.
The Motley Fool encourages community. Their online forum is open and welcoming. However, it’s easy to miss some of the details in the fine print: Their disclaimer admits that some of the information they assess comes from unverified parties, some of whom may not be entirely trustworthy. That should be a red flag to any investor.
The Motley Fool website includes this statement: “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.”
The Motley Fool is really only designed to be 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.
If you prefer a more nuanced and data-driven approach, it may be better to partner with a provider like Gorilla Trades.
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. As far as their historical performance is concerned, interestingly, their Rule Breakers high-growth picks have returned significantly less than Stock Advisor’s, but they’re somewhat 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. But there’s a pretty big downside: 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. 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.
In short, you may end up paying quite a bit to get the advice you’re looking for. If you do bite the bullet and spend the money, you’ll receive a ton of emails asking for more. It’s just not a great way to start your investment journey.
Is Motley Fool Worth It? The Final Verdict
Is The Motley Fool legit? They’re not fraudsters or hucksters. They’re honest about what they do and forthcoming about the risk involved. 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. That can be pretty problematic.
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. You’d be much better off with a data-driven provider.
Its Discovery and Extreme Opportunities are for more active traders, but their annual subscription rates are prohibitively expensive for common investors. There are more affordable alternatives out there that can bring equal gains.
As with any service, including The Motley Fool, weigh your priorities with the expenses involved in keeping up with their recommendations.
Gorilla Trades: The Better Option for Active Traders
If you’re looking for a stronger option for active traders, consider the benefits of Gorilla Trades. Gorilla Trades is for investors that are looking for detailed, data-driven recommendations on when to get into promising positions and sell for solid gains, regularly and dependably.
With a ton of educational content designed to help novice and experienced traders alike and an array of tools to guide your investments, Gorilla Trades won’t leave you feeling like a fool. Sign up for a free, no-risk trial to learn more.