The Motley Fool is one of the largest and most recognized financial media companies around today. If you’ve been interested in the stock market for more than a few months, you’ve probably been exposed to The Motley Fool’s content.
While The Motley Fool has many different ventures, the company is most known for its free articles and premium stock-picking services.
In this article, we are going to do a deep dive into the company’s premium services to determine whether or not they are worth the money.
Motley Fool Premium Services
Motley Fool offers a range of premium stock-picking services, including
- Stock Advisor
- Rule Breakers
- Everlasting Stocks
- And more
For the sake of this analysis, we will be focusing primarily on Motley Fool Stock Advisor.
Motley Fool Stock Advisor is the company’s flagship stock-picking service, with a track record dating back to 2002.
This service is the most likely starting point for new Motley Fool customers due to its price and broad appeal. Other services can be more costly and niche-focused (discussed more later).
Let’s get to it.
What Do Motley Fool Members Get?
Motley Fool members have access to a handful of resources, but the main offering is stock picks.
When you sign up for a Motley Fool membership, you get access to stock picks and research reports.
Stock Advisor members get instant access to 10+ “Best Buys Now” as well as two stock picks every month. Each stock pick is backed by a research report that explains the rationale behind the stock pick.
How Much Does Motley Fool Cost?
Motley Fool offers a few premium services.
- Stock Advisor costs $199/year
- Rule Breakers costs $299/year
- Everlasting Stocks costs $299/year
You can generally get a discounted rate on your first year, which brings the cost of Stock Advisor down to about $99 (click here to check out the latest discount).
You can also bundle the services with Epic Bundle to get Stock Advisor, Rule Breakers, Everlasting Stocks, and Real Estate Winners for $499/year.
When compared to other financial services, these prices are very reasonable (especially when you consider discounts and bundle pricing). For comparison, here is the pricing of some similar services:
- IBD Leaderboard costs $699/year
- Zacks Premium costs $249/year
- Morningstar Premium costs $249/year
It’s not uncommon to find other stock picking or advisory services priced at over $1,000/year.
Accounting for discounts, Motley Fool Stock Advisor is the most cost-effective service in its category. Now the question becomes – is it worth it?
Is Motley Fool Worth It?
In many cases, value is subjective. Even in the world of financial services, the value derived from a service may vary by customer. For example, two investors may watch the same investment course and achieve different results. One investor may 5X their returns while the other doesn’t improve their returns at all.
Fortunately, we have a way to assess the value of Motley Fool’s stock-picking services.
Anyone who pays for a stock-picking service is expecting to increase the returns of their investment portfolio.
Since Motley Fool is transparent about the performance of the company’s stock picks, we can quantify the value of the service.
We will use the S&P 500 as a benchmark. The S&P 500 is an index consisting of 500 of the biggest publicly traded companies in the world. When people tell you to put your money in an index fund, they are likely referring to the S&P 500 or a comparable alternative.
The S&P 500 is often used as a benchmark in the world of investing since it represents a very basic investment strategy that anyone can apply. Any proprietary investment strategy should beat the S&P 500 otherwise the investor would be better off just buying an S&P 500 fund.
For example, if I spent dozens of hours researching stocks and still underperformed relative to the S&P 500, I would have wasted both my time and my money.
This is actually the case with most funds. Most funds do not beat the S&P 500 consistently. In most cases, a simple investment in an S&P 500 will outperform alternative strategies.
That said, there are strategies that can beat the S&P 500. This leads us back to The Motley Fool…
The Motley Fool’s Stock Advisor stock picks have been beating the market for the past 20 years.
At the time of writing this (December 8, 2022), Motley Fool’s Stock Advisor picks generated returns of 357% compared to 114% for the S&P 500.
This means that Motley Fool’s stock picks have 3X’ed the benchmark.
Motley Fool provides a record of every stock pick ever made for investors who want to verify the performance (as we did).
Simply put, the service delivers (and has been for over two decades!).
That said, there are a few other considerations before you sign up for a membership.
Who is Motley Fool Best For?
While Motley Fool’s Stock Advisor service delivers, it’s important to make sure it is a good fit for you. Investment strategies are not “one-size-fits-all.”
Here are a few considerations.
Motley Fool’s investment style is geared towards longer-term investing. The company recommends holding the recommended stocks for at least five years.
Since Motley Fool focuses on growth stocks, investors need to be prepared to weather some volatility. If you are a year away from retirement, Motley Fool’s Stock Advisor picks may be too volatile. If you are over a decade away from retirement, these stock picks may provide a great way for you to maximize your returns.
If you are buying stocks with a long-term time horizon, you need to stick with them. This can’t be understated. Motley Fool’s picks are designed to outperform the S&P over longer periods of time. They may still be susceptible to drops in the short-term. This leads to our next consideration.
Since the inception of the Stock Advisor program, Motley Fool has recommended over 150 stocks that generated returns of 100% or higher. Some picks have returned upwards of 10,000%.
These types of returns don’t come without risk. While it’s possible for stock picks to generate positive returns immediately, this isn’t always the case. Don’t expect to generate upside returns of 100%+ if you can’t tolerate downside risk.
For context, Motley Fool recommended Netflix in June of 2006. The stock is now up over 10,000% from the date of the recommendation.
Did the stock go straight up? No. In fact, it dropped over 30% in the following months and experienced plenty of volatility during its meteoric rise. If you were shaken out of a position in the first couple of months, you lost 30%. If you held until now, you made over 10,000%.
As mentioned above, Motley Fool makes long-term stock picks that will experience drops in the short term. Be prepared to tolerate the associated risk (or set stop losses that make you more comfortable).
The last thing to consider before signing up for Motley Fool’s stock subscription services is your portfolio size.
The stock picks outperform the S&P 500, BUT you still need to recoup your initial investment in the service.
Motley Fool recommends Stock Advisor to investors with $5,000 or more to invest. More expensive services like Epic Bundle are recommended to investors with over $25,000.
Let’s run the math on that.
Assume you pay full price for Stock Advisor at $199/year. In order for the service to be worth it, you need to generate at least $199 in additional investment returns.
This means you need to have enough money to invest for those additional returns to be feasible.
If you have $1,000 to invest, you need to generate an additional 20% in investment returns.
If you have $2,000 to invest, you need to generate an additional 10% in investment returns.
If you have $5,000 to invest, you need to generate an additional 4% in investment returns.
If you have $10,000 to invest, you need to generate an additional 2% in investment returns.
As you can see, the value of Motley Fool’s service increases significantly for investors who have more capital to invest. While it wouldn’t be impossible to increase your returns by 20%, it’s not a reasonable expectation. Contrarily, it would be very reasonable to assume that Motley Fool’s stock picks could increase your returns by 4% or more (given the company’s track record).
To sum things up, Motley Fool is worth it IF:
- You plan to buy and hold stocks for 5+ years
- You can tolerate short-term downside
- You have $5,000 or more to invest with
Motley Fool’s stock picking services are reasonably priced, and the company is one of a select few that have beaten the market consistently for over 20 years.