Motley Fool: Beating the Benchmarks

There are standard benchmarks against which investment returns get measured, and one of the best recognized is the S&P 500. It is made up of some of the largest companies that almost everyone has heard of, and it is truly the gold standard for comparing investment performance. There are probably thousands of online stock picking services that the average investor could choose from, but one that consistently performs very well relative to the S&P 500 is the Motley Fool. It’s more likely that you have heard of it than not, so hopefully this will be a helpful overview of its strongest features and how it stacks up against other investment recommendation services. 

The Foolish Basics

One of the reasons that the Motley Fool remains so popular is the sheer simplicity of its service. It’s a lot of easier to get the hang of than investing in real estate, which can be capital intensive and complex. Motley Fool provides direct, specific and actionable stock picks. You don’t need an advanced degree or dozens of hours a week to conduct supplementary research. If you sign up for one of the Motley Fool’s services, you will get two stock picks per month. Just think of how well someone who was a subscriber must have done when they got a buy alert for stocks like Facebook and Tesla – while outliers, they have produced some truly foolish returns (pardon the pun) that no doubt made a lot of money for many people.

It’s worth keeping in mind that the Motley Fool has several subscription services aimed at different styles of investors. The best known is called Stock Advisor, which targets investments with long established track records and a greater degree of predictability in their valuation. It has produced some good winners but is overall a product more geared towards cautious investors who do not want to manage a lot of volatility.

Those seeking greater risk taking may be interested in Motley Fool Rule Breakers, a second service they offer that makes stock picks from somewhat outside the box. Rule Breakers focuses on emerging or lesser known companies, opening the door to potentially massive returns if they find the next hidden gem. But with that comes the risk of fluctuations in value, so investors who are faint hearted about sudden swings may want to look elsewhere.

A newer product can be found in Motley Fool Everlasting Stocks, which is somewhat similar to Stock Advisor in that it picks stocks with long and durable track records (they must be everlasting, after all!). It also recommends other asset types and is more oriented to overall portfolio design and management than pure stock picking, although it also does that.

Motley Fool vs Zacks

It is only fair to consider how the Motley Fool compares to other well known products, and Zacks is a good one to start with. Unlike Motley Fool, Zacks lets users make trades and transactions through its interfacing with Interactive Brokers. It also has a premium service called Zacks Plus that offers users access to a robust and detailed set of data that can be used to generate investment ideas and action them. Overall, the Motley Fool is best aimed at passive investors who are happy to buy and hold, while Zacks is for the active trade who never wants to miss an opportunity. 

Motley Fool vs Seeking Alpha

Another online tool that many will be familiar with is Seeking Alpha. Unlike Motley Fool, which consolidates the views of a few in-house experts into specific picks, Seeking Alpha crowdsources a wide range of articles and commentary on various investment ideas from thousands of individual users. Some may be understandably wary of accepting such wide ranging advice on a topic as important as investment selection, but they do use practices such as vetting authors and requiring the disclosure of conflicts in order to better inform end users. 

That said, like Zacks, Seeking Alpha is definitely geared towards investors with additional time, interest and expertise to vet a wide amount of information and narrow down their personal investment decisions. While doing due diligence is important and frankly always advisable, Motley Fool gives it to you straight without a lot of follow up research required.

Easy Enough for Even a Fool

The great thing about Motley Fool is that despite its funny name – or maybe because of it – even a fool could successfully use it. Follow their picks, be patient (they recommend being prepared to hold individual stocks for around 3-5 years) and you are likely to enjoy returns that outpace most standard benchmarks, including the renowned S&P 500. Frankly, given some of the silly things the government spends money on, the Motley Fool’s track record may serve as proof that people can manage their own money best. As we have outlined above, this is a much simpler approach than other common investment recommendation services that potentially involve hours sifting through data and making complex decisions.