Is the Motley Fool "Stock Advisor" really worth it?

[OldShooter]

Again, I think that's silly. If you have a skill why not monetize it? An electrician makes a fine living doing electrical work, but what's wrong with him putting "how to" videos on youtube to make even more moneyy off his knowledge? Same concept.

Well, if you had a skill that let you make unlimited money without much effort, wouldn't you be on your private tropical island or sitting by the pool on your private yacht? Would you really be hustling a few newsletter pennies on the side? I don't think so.

The other thing is that giving away your strategies reduces the money you can make as others pile into the deals. So you keep your mouth shut.

Nope, stock picking is not even a little like electrician work.

 

[garyt]

Well, if you had a skill that let you make unlimited money without much effort, wouldn't you be on your private tropical island or sitting by the pool on your private yacht? Would you really be hustling a few newsletter pennies on the side? I don't think so.

The other thing is that giving away your strategies reduces the money you can make as others pile into the deals. So you keep your mouth shut.

Nope, stock picking is not even a little like electrician work.

You still need money to buy those equities, I could have all the info in the world and if I don't have the cash to act on it what good does it do me?

Nobody is saying these stock picking companies are finding 100 baggers left and right and can make "unlimited money" (hyperbole much?) but if they can help you beat the S&P what's wrong with that?

As for a few newsletter pennies on the side, David Garner of Motley Fool is worth about $20 million. I'd say that's fairly lucrative.

And how does giving away your picks reduce the money you can make? The more people you get to buy the stock, the higher the price goes. It's been proven that a MF rec actually can move the price of a stock.

So yes, monetizing your knowledge in any industry is applicable and a smart thing to do.

 

[tdv2]

There is no data in the world that would lead anyone to the conclusion that active management of a stock portfolio is a good deal. The best you can expect on average over a long period of time is to come up with a result that mimics holding the market portfolio before costs. Essentially you have equal chances of winning or losing....exactly what you would expect from a random distribution. After costs, it's a losers game and that's just math. Going all the way back to Mike Jensen's paper in the May 1967 Journal of Finance on the performance of active managed stock mutual funds, the data back then and to this day is still crystal clear. Why do people think they can beat the market with some sort of skill? I have no idea. One thing I do know, there will be some folks out there who will continue to try, and that's why these newsletters exist.

 

[OldShooter]

@garyt, now you're being silly. Do you work for MF or some other industry player?

You still need money to buy those equities, I could have all the info in the world and if I don't have the cash to act on it what good does it do me?

A trivial problem if someone actually has some skill.

Nobody is saying these stock picking companies are finding 100 baggers left and right and can make "unlimited money" (hyperbole much?) but if they can help you beat the S&P what's wrong with that??

That's a big "If." There is a century or more of data that says that stock picking doesn't work. The root cause of this is that stock prices are best approximated by a random process. Harry Markowitz made this observation the foundation of Modern Portfolio Theory in 1952. The average stock picker will achieve the market average less his costs. Deviations from the average are due to luck. Try Ken French on picking a manager: https://famafrench.dimensional.com/videos/identifying-superior-managers.aspx

As for a few newsletter pennies on the side, David Garner of Motley Fool is worth about $20 million. I'd say that's fairly lucrative.

Think how much he'd have if he knew how to pick stocks!

Malcolm Forbes: "The only way to make money with a (market timing) newsletter is by selling one." David Garner knows this.

And how does giving away your picks reduce the money you can make? The more people you get to buy the stock, the higher the price goes. It's been proven that a MF rec actually can move the price of a stock.

Jeez. Competition 101: Your buys cost you more and your sells yield less. You can avoid this by buying and selling before you tell the crowd, aka "front running," aka "pump and dump," aka illegal price manipulation.

Do you read at all? I can recommend some books. You can also start with Nobel winner William Sharpe's three page paper: https://web.stanford.edu/~wfsharpe/art/active/active.htm and Google "S&P U.S. Persistence Scorecard" to see the randomness.

 

[OldShooter]

... Why do people think they can beat the market with some sort of skill? I have no idea. ...

You'd enjoy reading some of the behavioral finance stuff like Thaler's "Misbehaving" and Kahneman's "Thinking Fast and Slow." Also Jason Zweig's "Your Money & Your Brain." Basically, humans are wired to believe they (we) are exceptional individuals and the brain helps with this through dopamine stimulation when we "win." Because of this, the casinos and the lotteries will never go out of business. Their customers are motivated and stimulated in exactly the same way that stock pickers are. Zwieg has the brain scans to prove it and Thaler has the experimental data.

 

[tdv2]

You'd enjoy reading some of the behavioral finance stuff like Thaler's "Misbehaving" and Kahneman's "Thinking Fast and Slow." Also Jason Zweig's "Your Money & Your Brain." Basically, humans are wired to believe they (we) are exceptional individuals and the brain helps with this through dopamine stimulation when we "win." Because of this, the casinos and the lotteries will never go out of business. Their customers are motivated and stimulated in exactly the same way that stock pickers are. Zwieg has the brain scans to prove it and Thaler has the experimental data.

I read Jason Zweig's "Your Money & Your Brain" and I have a copy of Kahneman's "Thinking Fast and Slow" didn't read that one just yet. I know what you are saying about the dopamine stimulation and winning. Have read some of Kahneman and Tversky papers on various topics concerning winning and losing.

 

[garyt]

@garyt, now you're being silly. Do you work for MF or some other industry player?
>>>>I'm being silly? You're the one whom said the guy is on an island with all the money his stock picks made him. And no, I have nothing to do with MF other than I once used the service.


A trivial problem if someone actually has some skill.
That's a big "If." There is a century or more of data that says that stock picking doesn't work. The root cause of this is that stock prices are best approximated by a random process. Harry Markowitz made this observation the foundation of Modern Portfolio Theory in 1952. The average stock picker will achieve the market average less his costs. Deviations from the average are due to luck. Try Ken French on picking a manager: https://famafrench.dimensional.com/videos/identifying-superior-managers.aspx

Think how much he'd have if he knew how to pick stocks!
>>>>Cute but more silliness, you said these guys make pennies on newsletters.


Malcolm Forbes: "The only way to make money with a (market timing) newsletter is by selling one." David Garner knows this.
>>>>>MARKET TIMING being the important words there, nobody's talking about market timers, but you knew that


Jeez. Competition 101: Your buys cost you more and your sells yield less. You can avoid this by buying and selling before you tell the crowd, aka "front running," aka "pump and dump," aka illegal price manipulation.
>>>You never bought more of one of your winners as it went up? So long as the financials show it's going up higher, who cares? If it never goes up, you don't make any money


Do you read at all? >>> Nice veiled insult I can recommend some books. You can also start with Nobel winner William Sharpe's three page paper: https://web.stanford.edu/~wfsharpe/art/active/active.htm and Google "S&P U.S. Persistence Scorecard" to see the randomness.

My only point is that the idea that nobody who has real skill picking stocks would ever run a newsletter is silly. And MF is a perfect example of that.

 

[OldShooter]

My only point is that the idea that nobody who has real skill picking stocks would ever run a newsletter is silly. And MF is a perfect example of that.

Believe what you like, including that MF has real skill.

 

[strobot]

I've used both Motley Fool Stock Advisor and Rule Breakers since 2009 though I've recently let Rules Breakers go in favor of reducing risk (index funds) now that I've retired.

How did you do in comparison to your current index funds? Or, looking back, how did you do against the S&P?

 

[tdv2]

There is a century or more of data that says that stock picking doesn't work. The root cause of this is that stock prices are best approximated by a random process. Harry Markowitz made this observation the foundation of Modern Portfolio Theory in 1952.

Modern Portfolio Theory 1952, not sure he based it on stock prices being random. While he may have believed this to be true, his work focused on portfolio construction with a collection of assets that minimized risk for an expected level of return. i.e. a portfolio of non-correlated assets can have less variance than a portfolio with a similar expected return with all one type of asset. The key assumption in MPT is that investors are risk averse.

 

[Time2]

Well, if you had a skill that let you make unlimited money without much effort, wouldn't you be on your private tropical island or sitting by the pool on your private yacht? Would you really be hustling a few newsletter pennies on the side? I don't think so.

The other thing is that giving away your strategies reduces the money you can make as others pile into the deals. So you keep your mouth shut.

Nope, stock picking is not even a little like electrician work.

I don't know about the few pennies, I read that Bob Brinkers Marketimer has 200,000 subscriptions at $185 each. 200,000 x $185 = $37M yearly.
I paid it for probably 10 years. I credit Bob's radio show and newsletter for a lot of my financial education and a large portion on my networth.
As far as giving away your strategy, if you own a stock and convince other people to buy it, doesn't that drive up the price of your stock.

 

[Montecfo]

OP asks a simple question and what amounts to a religious discussion ensues.

And by the way, Ben Graham says hello.

 

[strobot]

OP asks a simple question and what amounts to a religious discussion ensues.

And by the way, Ben Graham says hello.

Lol. I tried to be very clear in the question, but knew it would devolve into this sort of debate...sigh. Where are the mods when you need them?

 

[WhenIsItTime]

The disdain and scorn for stock picking on the forum really baffles me. Macro view (broad fund) is fine, micro (single stock) view and you get pounced like Trump on the opposition.

Context is everything. Some of us like to take a small portion of portfolio and gamble on specific companies.

 

[r3saving]

How did you do in comparison to your current index funds? Or, looking back, how did you do against the S&P?

Honestly, the only funds I held at the time were in a 401k which didn't have any index funds offered. My 401k with an 80/20ish allocation and fees did under perform the IRA and Roth most years and over all. Measured against the S&P500, the accounts also outperformed overall.

Disclaimer; by dumb luck, I happened to start investing in stocks in March of 2009 and also dumb luck, I have yet to have experienced any serious or prolonged downturn. This gave me plenty of opportunity to make mistakes and still recover from them. Mistakes, meaning selling a company way too early or selling part or all of a company that was doing well and replacing it with a company that didn't do well at all or just outright buying a complete dud. There were years that were completely sideways and a year or two that I underperformed. Overall however, I learned that a mostly hands off approach worked well though allocations can certainly get out of whack.

There are plenty of people on the boards that have been retired for many years and have remained in all or mostly individual stocks successfully. I might have taken the same approach however, having worked for two sizable companies that went bankrupt, I decided to start selling stocks and moving the funds to VTSAX. I still have more money in individual stocks than the index fund but that’s just because I’m slow to sell.

Good luck whatever you decide

 

[r3saving]

strobot,

As a side note; Wealthtrack, Consuelo Mack, has done several interviews with David and Tom Gardner. I'm not sure whether or not I can leave a link here but you can search for Motley Fool on her website. There is an excellent two part interview from 2018 that may (or may not) be of interest.

 

[Calgary_Girl]

I used their recommendation to buy AcuityAds back in July and I’m so happy that I did. I’m up 300% in 5 months and the stock is taking off. There are rumors it could be the next TTD (The Trade Desk).

 

[Gazingus]

I went all in with MF in June. That was lucky timing as they are all over growth stocks, of course. I'm sticking with them again this year and my services will cost about 0.2%.

I know it's not for everybody, but I'm happy to pay that to let them do the work. I believe in their philosophies and their results support that.

 

[Running_Man]

It is interesting to read all the denigration of the Motley Fool stock Review Service. It is extremely rare to find a stock picker critisize an indexer as most people are probably not emotionally capable of proper investing in individual stocks, and the one thing indexing does is keep you in your stocks.
But the Motley Fool Stock Review over the last 20 years has outperformed the Vanguard Total Market Fund by 5X. That is not to say it will continue to do so, and Old Shooter will merely claim it is luck and impossible, but the ability to have an opinion on something that has not been attempted, or to fail and claim it is impossible is one of the greatest feats index investors have been proven to hold.

Claiming a stock picker selling that information must be a charlatan as there are no Nobel Prizes without even checking on actual results is an index investors dream job.

Meanwhile the Nobel Prize winners make hundreds of millions through investment advice for: Yes Index Funds! YES pay me .79% of your portfolio per year and I can optimize the portfolio to return better than the index!
Example: the Nobel Prize winners Fuller & Thaler have people investing 10 billion for a 79 million dollar annual administration fee for a fund that has underperformed Vanguard Total Marget by 70% over 10 years (200% vs 270% - if you invested 100K you'd made 100K with the Nobel Prize winners and 170K with Vanguard Total Market, (Fuller & Thaler fees were 790 million! oh how it pays to have a Nobel Prize) oh and if you'd invested with Motley Fool Stock picking service? You'd have 850K in profit on 100 K in the last 10 years for $99 a year or 0.01% of the portfolio. The only sure thing is it takes much less work to sell an index.

Here are the last 5 years returns on average on all the annual stock picks by Motley Fool Stock Review:
2016 picks: up an average 257% (compared to the S&P 500’s 75%)
2017 picks: up an average 108% (compared to the S&P 500’s 49%)
2018 picks: up an average 137% (compared to the S&P 500’s 30%)
2019 picks: up an average 70% (compared to the S&P 500’s 21%)
2020 picks: as of mid-September, are up 57% (compared to the S&P 500’s 12%)

 

[Montecfo]

I do think it's an interesting service, based on the ideas I've uncovered by running their teasers through stock gumshoe.

I have a buddy who does use it and he's quite happy with it. I may have to look at it further.

 

[harley]

Just out of curiosity, how would you invest using MFSA? They recommend hundreds of stocks every year. Do you buy them all? And understanding that I know nothing about it, do they tell you when to get back out of the stocks?

Another question. Assuming you do this investing in taxable accounts, do those returns take taxes into consideration? If they are moving you in and out of stocks at short term CG rates, I'd be very impressed with those numbers. If they don't account for taxes, maybe less so.

I'm curious about this. If anyone has any answers I'll be interested in reading them. Thanks.

 

[unclemick]

Mad money. At age 77 and with spending $ due virus lockdown started MFSA in 2020. North of 30 stocks and climbing. If they all go to zero not a problem. Plan to DCA extra RMD til I croak.

Since 1966 pretty much 60/40 until 1977 or so When 'Bogle's Folly' became available via 401k. 2006 went Vanguard Retirement fund for heavy lifting. Side money was dividend stocks and wild and crazy stuff like 'psst Wellesley' among others.

Heh heh heh - Since I can't take it with me any extra may go to plant more American Chestnuts on The Farm.

 

[CRLLS]

It would appear that MFSA is a pay for service side hustle of Motley Fool. The cost is $100 per year. I tried to find out more about it this morning but have not been able to without signing up. I hate having to sign up for anything with a fee in order to find out the nitty gritty details, or even the most basic of info. Even if they offer a full refund after some trial period. Is it just a newsletter? Is it an investment club? Who knows how it works?

The way I look at it, if I were to try it out by investing $10,000, with "fees" $100 per year, that ends up being the equivalent of an 1% AUM. Not counting any other "fees" which are not disclosed before signing up.

 

[someguy]

The way I look at it, if I were to try it out by investing $10,000, with "fees" $100 per year, that ends up being the equivalent of an 1% AUM. Not counting any other "fees" which are not disclosed before signing up.

True, for the first year and with that modest amount invested. Obviously if you invested $100K, that would be 0.1%. And, the fee is not at all AUM -- it's either fixed, or at least not tied to the account size.

 

[garyt]

Just out of curiosity, how would you invest using MFSA? They recommend hundreds of stocks every year. Do you buy them all? And understanding that I know nothing about it, do they tell you when to get back out of the stocks?

Another question. Assuming you do this investing in taxable accounts, do those returns take taxes into consideration? If they are moving you in and out of stocks at short term CG rates, I'd be very impressed with those numbers. If they don't account for taxes, maybe less so.

I'm curious about this. If anyone has any answers I'll be interested in reading them. Thanks.

Motley Fool is buy and hold, they rarely sell. They're definitely not churning. I don't know about anyone else but I used them as a starting point for ideas then I did my own research. They recommend two stocks a month, I might have bought 20 of their recs in two years. I posted my results earlier in this thread. This thread has me thinking maybe I'll give them another look. For $49 it's worth the reading and the research is kind of fun even if I don't invest.