Can I trust the Motley Fool?

Question

A while back I checked out The Motley Fool while doing some research on mutual funds. I found their educational content to be a great overview of what to look for and started exploring. While The Motley Fool has a lot of great content, I'm not entirely comfortable with their incessant up-selling.

They always so eager to tell me about some "insiders" stock of the day that they are sure is just about to explode tomorrow if only I will give them some of my valuable personal information. Is this a scam? Are they just using their legacy educational content to bait people into their premium services? Are their premium services even any good? The Motley Fool once had a fair amount of Internet street cred.

Are The Motley Fool's stock picks and services worth giving any mind share to or are they just another Jim Cramer loudly shouting ticker symbols to sell advertisements?

Answer 1

The Motley Fool is generally regarded as legit, at least in that they're not likely to do anything outright fraudulent and they definitely have reasonably in-depth content to provide you.

The Motley Fool makes a fair amount of money off the subscriptions, though, and they do hawk them quite aggressively. If I didn't have a generally good opinion of them to begin with, I'd have been completely put off as well. It's pretty shameful; however, they have publicly (in podcast) responded to this claim suggesting that while they understand marketing can be over the top they stand by their services and their results.

I don't think it's worth hundreds of dollars a year, but then again, I don't look at investing as a second career like the Fool likes to suggest, either.

Answer 2

Upselling you is how they make money. That's the price of the free content.

Test their recommendations. Pretend to buy the stocks they say. How do they do? Do they ever say to sell the stocks after their buy recommendations?

There are lots and lots of opinions out there. I doubt people really hear about the good ones because (a) the good ones have paid newsletters and/or (b) the good ones aren't telling a soul because they're absolutely cleaning it up.

Warren Buffett doesn't announce his intentions. He's been buying for a while before anyone finds out.

Answer 3

It might be time for an updated answer. The Motley Fool recently launched two ETFs: TMFC and MFMS.

They've finally put their money where their mouth is. If these ETFs beat the market after a 10-year period, their stock-picking ability will be validated.

So far, they have done well, but it's been a very short period.

Answer 4

Not sure how I came across the Motley Fool blog in the first instance, but found the writing style refreshing - then along came some free advice on ASX share prospects, then the next day and email expounding the benefits I would get by joining up for two years at 60% off if I hit the button "now", getting in at ground floor on the next technology stock rocket - I replied:

"What a hard sell - why wouldn't I apply the age old adage of " If it sounds too good to be true, it probably is"

Their reply was;

"Thanks for your note. The honest answer is that despite people knowing they should do something to help themselves prepare for their financial futures, few actually do it. We find these messages actually work in getting people to hit 'yes', much better than an understated email that just says 'here are our results and our philosophy - let us know if you're interested', unfortunately.

Yours Foolishly"

So I have put some of these recommendations onto a watch list, time will tell.

Answer 5

I've had a MF Stock Advisor for 7 or 8 years now, and I've belong to Supernova for a couple of years. I also have money in one of their mutual funds.

"The Fool" has a lot of very good educational information available, especially for people who are new to investing. Many people do not understand that Wall Street is in the business of making money for Wall Street, not making money for investors.

I have stayed with the Fool because their philosophy aligns with my personal investment philosophy. I look at the Stock Advisor picks; sometimes I buy them, sometimes I don't, but the analysis is very good. They also have been good at tracking their picks over time, and writing updates when specific stocks drop a certain amount. With their help, I've assembled a portfolio that I don't have to spend too much time managing, and have done pretty well from a return perspective.

Stock Advisor also has a good set of forums where you can interact with other investors.

In summary, the view from the inside has been pretty good.

From the outside, I think their marketing is a reflection of the fact that most people aren't very interested in a rational & conservative approach to investing in the stock market, so MF chooses to go for an approach that gets more traffic. I'm not particularly excited about it, but I'm sure they've done AB testing and have figured out what way works the best.

I think that they have had money-back guarantees on some of their programs in the past, so you could try them out risk free. Not sure if those are still around.

Answer 6

I would personally beware of the Motley Fool. Their success is based largely on their original investment strategy book. It had a lot of good advice in it, but it pushed a strategy called "The Foolish Four" which was an investing strategy.

Since it was based on a buy-and-hold method with 18-month evaluation intervals, it was not a get-rich-quick scheme. However, its methods were validated through data mining and subsequently turned out to be not so good.

At least they admit this: https://web.archive.org/web/20130816011938/http://www.fool.com:80/ddow/2000/ddow001229.htm

Answer 7

There are two parts to this answer.

First, let's talk about the core service. I believe Motley Fool is legit. I've been using their services on and off for almost six years. I started using them at a time when they were still sending PDF research reports and they always had some great insights. I've tested Jim Cramer's premium service as well (Action Alerts Plus) and I liked Motley Fool a lot better. Contrary to their marketing, the reports are actually well-researched and less hyped. They explain their picks and detail and warn of any risks that come with the stock pick. If you want more information on the service itself, this review does a good job of breaking it all down.

Second, let's talk about the marketing and upsells. In recent years, Motley Fool has been running some aggressive marketing campaigns. I'm pretty sure everyone has seen the "triple down" type campaigns. I'm not sure why the company went in this direction because it dilutes the professionalism of their brand but, personally, I just look past it. If you're going to buy into hype, you won't do well in investing - whether that's through Motley Fool, another service, or your own research.

Motley Fool's core offering is the Stock Advisor program and that's really all you need. It's priced at $99/year which is affordable and if you combine their picks with your own due diligence, the subscription can pay for itself. Don't get sucked into the hype of the special reports. Obviously, the company wants to upsell you, but the Stock Advisor program is the main service and it has a proven track record. As a member, you can see a history of all of the picks the company has ever made (losers and winners) dating back to the inception of the program. You really only need a few good stock picks to do well, so don't get caught up in the hype of "insider tips" or industries set for "explosive growth."

In the past few years, it's been very easy to make money following basic investment advice, such as the recommendations made by Motley Fool. Think about the FAANG stocks that have been a hot topic. If a company made a buy alert at ANY time between 2016-2018 it would have been a killer call. The market was hot and a lot of the most "obvious" companies reaped the rewards. The market environment is changing a bit now but Motley Fool has been around for over two decades.

The last thing to keep in mind is that a stock pick service helps you generate ideas but you still need to do your own research and control your own risk. "Buy and hold" strategies without regard for cutting losses may work well in the long-term but they could have costly short-term consequences. Take the FAANG stocks I mentioned above, some of which Motley Fool made recommendations on. A buy between 2016-2018 would have yielded amazing returns but a buy at the end of 2018 would have resulted in a "loss" of ~40% by early 2019. Luckily, those stocks recovered but you never know what the future holds.