Motley Fool Stock Advisor Review

Motley Fool Stock Advisor Review (2019)

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This article was last updated on 12/11/2019.


This article provides detailed information about the Motley Fool’s investment newsletter known as “Stock Advisor”. I signed up for the newsletter back in May of 2019. As of this writing, their stock picks from May through December are underperforming the S&P 500 (for full details, scroll down to the section titled “Motley Fool Stock Advisor Returns” at the bottom of this article). However, it’s only been about 6 months, which is not a long enough time frame to assess a newsletter’s value. In fact, when looking at Stock Advisor through a longer time frame, their stock picks have, on average, been beating the market.

Motley Fool Stock Advisor Review

Are you interested in signing up for the Motley Fool Stock Advisor but are wondering whether it’s worth the money? Or perhaps you might be thinking that this service sounds too good to be true. This article will answer all your questions about the Motley Fool Stock Advisor as well as show you my results with their stock picks.

I signed up for a one-year membership of Stock Advisor at the end of May and I will be closely following the Motley Fools’ stock recommendations. This article will frequently be updated. I encourage you to sign up for our free newsletter to keep up with this review as well as our other informative articles related to investing and personal finance.

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What is the Motley Fool Stock Advisor?

The Motley Fool is a financial services company founded in 1993 by David and Tom Gardner. Their website offers numerous articles and videos that pertain to investing. They also sell various investment newsletters which, they claim, can help you beat the market (see Image 1 below).

The Motley Fool Stock Advisor is probably their most popular newsletter. In it, they reveal two new stock recommendations every month. These recommendations are typically emailed to subscribers on the first and third Thursday of every month. Then, on the second and fourth Thursday of every month, they publish what they call “Best Buy Now” stocks. These are typically 5 stocks from their previous recommendations which they believe are the best opportunities to invest in at the time of publication (see Image 2).

Image 1. Newsletter performance
Image 2. Schedule of stock recommendations

In addition, the newsletter also provides a list of 10 stocks which they refer to as “Starter Stocks”. These are companies the Motley Fool believes to be financially strong with solid management and business practices. They advise subscribers to purchase at least 3 stocks from that list. Once you’ve selected your 3 favorite companies, the newsletter encourages you to eventually build a portfolio of 15 stocks or more.

Is the Motley Fool Stock Advisor legitimate?

The Motley Fool is a legitimate business in the sense that they provide a real service for your money: you pay an annual fee and they send you weekly stock recommendations. The question is whether their stock picks actually beat the market as they claim in their ads. They sell numerous newsletters, but the one that we will be focussing on here is their Stock Advisor newsletter.

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How Stock Advisor is advertised

Given that you are reading this Motley Fool Stock Advisor review, chances are that you’ve seen ads for their newsletter. After all, their ads are everywhere. But unless you’ve clicked on one of these ads, you might not have realized that they are selling a newsletter. The reason for this is because many of their ads claim to reveal a “hot stock” or an emerging industry and don’t mention anything about a newsletter.

Currently, one of those industries is the Cannabis industry. If you are a frequent reader of investing articles, chances are that you have seen an ad like this one from the Motley Fool:

Ad 1 for the Motley Fool Stock Advisor

Once you click on the ad, it will open a “special report”, like the one below:

Motley Fool Stock Advisor special report about the cannabis industry
This ad can be found here.

After quite a bit of reading, the report finally mentions the “Stock Advisor” newsletter and tells you that you can get the report for “free” when you sign up.

What it doesn’t tell you is that the newsletter itself costs between $99 and $199 a year.

Here are some other examples of ads you might have seen for the Motley Fool Stock Advisor:

Ad 2 for Motley Fool Stock Advisor
Ad 3 for the Motley Fool Stock Advisor

Does the Motley Fool Stock Advisor beat the market?

I am generally skeptical of claims of “easy” money. Beating the market is difficult and very few people succeed at it on a consistent basis. But I believe that it is possible for a small number of investors who are able to analyze companies, industries or trends better than the average person.

I have decided to put the Motley Fool Stock Advisor to the test. So I signed up for their newsletter at the end of May 2019 and will be posting (and regularly updating) the returns of their stock picks at the bottom of this article.

Methodology and Assumptions

Every other week, I paper trade the latest stock recommended by the Motley Fool. I’m “investing” $1,000 into each stock. I assume no commissions and I buy fractional shares to invest as close to the full $1,000 into each stock as possible. (There are now multiple services that no longer charge commissions and/or allow you to purchase fractional shares, such as M1Finance.) I believe this to be a fair way of measuring the returns of their stock picks.

Then I “invest” $1,000 into the S&P 500 in a separate portfolio. I’m using Vanguard’s 500 Index Fund Investor Shares (VFINX), again with fractional shares and with no commissions.

  • I signed up for the newsletter in late May, after they had already released their two new stock picks for the month. Luckily, both stocks were trading for a lesser price than when they were originally recommended. So I decided to start with those two stocks. Given that the price of both stocks was a bit lower than when the Motley Fools had initially recommended them, this should be more than fair to the newsletter.
  • In order to make this test as realistic as possible, I look up prices for the recommended stocks at a random time on the day that the recommendation gets published. I’m trying to replicate the experience that a real investor would have with this newsletter. An investor would be unlikely to purchase the stock right at 12 pm CST (when the latest stock name is revealed), as he would need time to read the report and possibly do some additional research prior to investing in it.
  • Once I look up the market price of the recommended stock, I simultaneously look up the price of VFINX and jot down both values to make a proper comparison.
  • If the Motley Fool tells subscribers to sell a position, I will invest all proceeds into the VFINX.
  • If a stock is recommended more than once, I will invest an additional $1,000 into that stock, as well as into the VFINX.

Motley Fool Stock Advisor Returns

Here’s the part you’ve been waiting for! Here are the results, as of 11/10/2019:

Starter Stocks

Stock Advisor’s 10 “Starter Stocks”: After investing $10,000 ($1,000 into each stock) in May 2019, the starter stocks are currently worth $9,903.53 (0.96% loss). Now let’s compare these results to the S&P 500. The $10,000 I invested into VFINX are now worth $11,102.42 (11.02% gain).

Winner: S&P 500

Monthly Stock Advisor Recommended stocks

After investing a total of $13,000 ($1,000 into each of the bi-weekly stock recommendations), my paper-traded portfolio is currently worth $11,957.56 (an 8.01% loss). Meanwhile, the $13,000 invested into the VFINX are now worth $13,768.35 (a 5.91% gain).

Winner: S&P 500

Remember that the results above do not take the cost of the subscription into account (this can run between $99 and $199 per year). So you would need to invest a sufficiently large amount into their stock picks to offset the cost of the newsletter, otherwise, your personal returns could vary significantly from the ones listed above.

Historical Data

Monthly Recommendations

DateTotal Amount InvestedReturns*S&P 500 ComparisonWinner
9/19/19$10,000-3.73%3.79%S&P 500
8/26/19$8,000-1.66%-0.15%S&P 500
7/19/19$6,0007.53%3.29%Motley Fool

10 Starter Stocks

DateTotal Amount InvestedReturns*S&P 500 ComparisonWinner
9/19/19$10,000-0.17%8.16%S&P 500
8/26/19$10,0001.60%3.40%S&P 500
7/19/19$10,0005.59%6.71%S&P 500

*Note: these returns do not take the cost of the newsletter into account

Analysis (9/19/2019)

Although it is true that the market currently appears to be “crushing” the Motley Fool’s stock recommendations, it wouldn’t be fair to reject the newsletter’s claims after such a short run. For one, the stock market has experienced significant volatility in recent weeks and months. Many of the companies that the Motley Fool recommends are solid businesses. Quite a few of them are suffering short term losses due to the trade war with China and other market uncertainties.

There is no question that the gap in performance between the S&P 500 and the Motley Fool Stock Advisor has widened in recent weeks. Are the Motley Fools worried about their recent performance? I doubt it. For one, investing is a long-term game. Also, beating the market (or at least attempting to do so) requires additional risk since it concentrates your portfolio into a smaller number of companies. In addition, methods that have historically beaten the market (such as the Dogs of the Dow), tend to experience bigger losses in volatile markets.

If you are the type of person who cannot stand to see your portfolio drop more than the overall market from time to time, then clearly this newsletter is not for you. But for everyone else, I would keep an open mind and see what happens over a longer period of time. Stay tuned!

Conclusion: Motley Fool Stock Advisor Review

At this point, it is still too early to determine whether the Motley Fool Stock Advisor’s stock recommendations will beat the market over the long run. Therefore, I am not officially rating this newsletter just yet. But I will be regularly updating this page so please make sure to sign up for our free newsletter to keep up with our latest reviews of personal finance books and financial products.

The opinions in this Motley Fool Stock Advisor review are our own and we do not let advertisers influence our content. To support our work, some of the links in this article might be from our sponsors.

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