Motley Fool

[gary m]

I've followed Motley Foll website for a few years as a casual observer. They seem fairly well grounded with a broad variety of advice. Yesterday I learned they will now offer a new Mutual Fund with no specific limits like smal, med, large cap or value or growth. What's the opinion here on the forum?

[ziggy29]

My opinion? The Motley Fool has become what it used to disdain.

TMF was designed originally to help DIY investors not need high-priced financial advisors or expensive and/or loaded mutual funds. As time went on, they have been becoming more and more of just that. Now they try to sell high-fee mutual funds and financial advice -- the kind of thing they used to say you didn't need. They used to ridicule "the Wise," but they are becoming more and more indistinguishable from the Wise.

I've heard about this fund. It carries something like a 2% expense ratio, does it not?

In short, I think they are sellouts in that regard, no longer sticking to the principles they were founded on but instead resorting to the same make-a-buck tactics they used to deride. Nothing wrong with making money, but it's a shame they had to abandon their principles to do so.

[FUEGO]

Here's something to LOL at (from their marketing email I was forwarded)

As was pointed out - note their nice little 2.3% ER, waived down to "only" 1.35%. I find it funny how they toss around John Bogle's name and advice regarding mutual fund expenses and how they eat up a significant portion of investors' returns. And then they tell you all the fees they aren't charging you. Just to tell you the exorbitant fees they are going to charge you. And their "unique" fulcrum fee structure? Not really unique as Fidelity and Vanguard have implemented it in their fund manager's compensation structure for a while.

But, hey, you'd have to be a fool not to invest with these jesters, right?

Quote:

And then there's the most important question of all... For years, The Motley Fool has argued that mutual funds are an expensive alternative for most investors. More often than not, it seems that with mutual funds, you get what you don't pay for. John Bogle, the father of modern index funds, argues that cost is the single most important predictor of any fund's long-term performance. For Bogle, it's simple: The lower the cost, the better the fund. Yet we're concerned that most investors don't pay enough attention to costs -- and not just the management fees that funds charge you each year. There are also turnover, capital-gains taxes, trading commissions, and so-called "friction costs." In his book The Battle for the Soul of Capitalism, Bogle argues that over the course of your investing career, these costs can eat up to 80% of your rightful profits. That's why, although we do accept an annual fee for managing your Independence Fund account, we have taken steps to keep our fees in check. For one thing, Motley Fool Independence Fund is a no-load fund. That means you never pay an up-front sales charge or commission to invest. You don't pay so-called 12b-1 fees to help us market the fund, either. Of course, you will pay for the fund's operating expenses, which are estimated to equal 2.30% of the fund's assets over the first year of operations. However, the fund's investment advisor will waive its fees or reimburse fund expenses to keep the annual expense ratio at 1.35% until at least March 31, 2010. Also, to keep the fund's expenses low, we discourage small accounts and short-term trading by assessing a $24 annual fee on accounts of less than $10,000 in value, as well as a 2.00% redemption fee on shares redeemed within 90 days of purchase. And unlike too many U.S. mutual funds, which typically hold a stock for less than one year, we intend to be long-term, buy-and-hold investors at heart. And there's one more thing ... Did we mention we get paid more for beating the market? And when we don't outperform our benchmark, we make less. That's because we've opted for an unusual compensation model that allows our fees to increase or decrease depending on the fund's performance. In the industry, we call this a "fulcrum fee" structure. You can learn more about how it works by reading the Motley Fool Independence Fund's prospectus. This unusual component of our fee structure gives your manager an incentive to earn the highest possible return relative to the market, not merely pump up the fund's assets the way most other funds do. Just as important, your portfolio manager, Bill Mann, is a meaningful shareholder in the fund. He's investing right along with you. And here's something else: The Motley Fool has $1 million of its own money invested in Motley Fool Independence Fund. So, you see, our interests really are aligned with yours, in more ways than one.

(reproduced under the fair use doctrine that allows reproduction of less than the whole work for criticism purposes)

[samclem]

Yep, sellouts. And the hype and admails I get from them are amazing.

[FUEGO]

Quote:

Originally Posted by samclem Yep, sellouts. And the hype and admails I get from them are amazing.

It's foolish.

[Khan]

I saw that email alert and thought about the history of TMF. Oh for the '90s, when we were all above average investors.

[mickeyd]

TMF is a good model for this and other forums as to what NOT to do.

[clifp]

I agree with everybody stay away from the fool mutual fund. The phrase "we have met the enemy and He is us" really applies to the Motley Fool. It is a pity because MF used to be a good organization, but when they found that their DIY approach made financial sense for everybody but themselves they sold out.

[freebird5825]

I ran across the Motley Fool site many years ago. Something about its flavor just didn't set well with me.
Hard to explain, but it just seemed...well...silly and over the top.
I have read some of their articles over the years just to keep myself aware of different opinions.

[Hamlet]

When the Motley Fool started charging money for investment advice, this is what a friend of mine wrote on their forum--

"No question, now, what had happened to the faces of the pigs. The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which."

On the plus side, Bill Mann has written a lot of articles I found useful, and seems to be fairly inoculated against getting sucked into bubbles. There are worse people managing money.

[FinanceDude]

Didn't this Forum run away from MF because they started charging?

[Sarah in SC]

Hey, IIRC, fulcrum fees are illegal in most cases. The federales frown on them, if my CFP coursework was correct. From Investopedia:

What Does Fulcrum Fee Mean?
An additional, performance-based fee an advisor charges a client. The advisor charges the fee when he or she achieves a return above a specified benchmark.

Investopedia explains Fulcrum Fee
This is one of the only performance-based fees that advisors are allowed to charge clients. A couple of conditions must be met in order for an advisor to charge a fulcrum fee:

1) The returns must exceed the appropriate benchmark (and if they don't, the base fee must be reduced).
2) The only clients that can be charged are the following: registered investment companies, individuals with an account value greater than $1 million and individuals with an account value greater than $750,000 and a net worth greater than $1.5 million.

[FUEGO]

Quote:

Originally Posted by Sarah in SC Hey, IIRC, fulcrum fees are illegal in most cases. The federales frown on them, if my CFP coursework was correct. From Investopedia: What Does Fulcrum Fee Mean? An additional, performance-based fee an advisor charges a client. The advisor charges the fee when he or she achieves a return above a specified benchmark. Investopedia explains Fulcrum Fee This is one of the only performance-based fees that advisors are allowed to charge clients. A couple of conditions must be met in order for an advisor to charge a fulcrum fee: 1) The returns must exceed the appropriate benchmark (and if they don't, the base fee must be reduced). 2) The only clients that can be charged are the following: registered investment companies, individuals with an account value greater than $1 million and individuals with an account value greater than $750,000 and a net worth greater than $1.5 million.

I think these mutual funds that have fulcrum fees fall under the "registered investment company" exception.

[FinanceDude]

Quote:

Originally Posted by Sarah in SC Hey, IIRC, fulcrum fees are illegal in most cases. The federales frown on them, if my CFP coursework was correct. From Investopedia: What Does Fulcrum Fee Mean? An additional, performance-based fee an advisor charges a client. The advisor charges the fee when he or she achieves a return above a specified benchmark. Investopedia explains Fulcrum Fee This is one of the only performance-based fees that advisors are allowed to charge clients. A couple of conditions must be met in order for an advisor to charge a fulcrum fee: 1) The returns must exceed the appropriate benchmark (and if they don't, the base fee must be reduced). 2) The only clients that can be charged are the following: registered investment companies, individuals with an account value greater than $1 million and individuals with an account value greater than $750,000 and a net worth greater than $1.5 million.

In other words, HEDGE FUNDS. Most hedge funds get a 2% wrap, AND 20% of the yearly GAINS...nice money if ya can get it.........

[Sarah in SC]

I was waiting for someone to notice that. I love it! That FD, doesn't miss a beat.

[haha]

Quote:

Originally Posted by mickeyd TMF is a good model for this and other forums as to what NOT to do.

Motley Fool has an extremely good REIT forum, and used to have and may still have an excellent Berkshire Hathaway Forum. Still plenty of people on these and likely others that I have not looked at who believe business sense and homework can be made to pay off over time in the markets.

Like the Band sang 40 years ago- "Ya take what ya need and ya leave the rest..."

Ha

[brewer12345]

Some of the forums are OK at the motley fool. The rest of it is garbage. Stay away from the mutual fund.

[Worker Bee]

I've followed TMF for several years. It has been sad to see the way they have slowley become complete sell-outs. They have been consumed by "The Dark side".

[Sarah in SC]

I'm reading a great book by Jason Zweig about neuro-economics and he references something about the Motley Fool I'd forgotten--some mumbo jumbo stock selection tool they sold way back when that took the stock price's square root and used it to determine if the stock was going up. Hard to believe what could be sold during the tech bubble, eh?

[Texas Proud]

I stopped reading MF so long ago I can not remember.... even before they started to charge for their site...

They were showing portfolios that were making 100%... heck maybe even 1,000% returns (remember dot com)... and they said IT DOES NOT MATTER WHEN YOU BUY A STOCK AS LONG AS IT IS WITH A GOOD COMPANY.... (or maybe a dominant company or the the biggest in its field... not sure which as it was a long time ago)...

SO, you buy GM, BofA, Microsoft (now, again, they were using dot coms, but their advice was for all of the market).... it does not matter what their PE is, what the economy is doing... just buy...

I thought that was bad advice so I stopped reading....