To all readers of this board,
I thought I would share a thought as a very new investor in a middle-aged body. As a scientific researcher, I have been trained to question everything, even my own ideas, and look for numerically conclusive evidence to support or refute a given assertion/hypothesis. Without any warning, I knew better than to make investing decisions based on daily stock news reports. MF seemed like a descent alternative, but several questions/observations emerged as I looked at their marketing of Stock Advisor:
Their numerical success vs. the S&P seems inflated. First, it is overall performance over almost 20 years. Second, it is very much bolstered by the enormous success of very few companies (e.g., AMZN).
Conflict of interest. On the one hand, I would want the person telling me how to invest my money to be personally invested in the same opportunities. But, if they invest in a particular stock at a lower price, wouldn’t it improve their own ROI if they get a bunch of other people to then invest in the same stock? And wouldn’t they sell their own holdings before providing the sell signal to their subscribers?
If David has 3x better success than Tom, why does’t Tom follow David’s guidance, rather than making his own picks?
On a very positive note, it is quite nice to have easy access to the research and reports on companies that interest me.
This board was an unexpected hidden gem!!!. Saul’s rules have discouraged the sharing of unsubstantiated opinions. Instead, I have the pleasure of reading post after post of well researched competing arguments with numerical evidence. I am incredibly grateful to everyone who takes the time to do arduous task of finding relevant information and translating your findings into a language that I can understand. I’ll spend much more time at first taking in the wealth of knowledge exhibited here, but I will return the favor when I feel I have something worthy to contribute.
P.S. Saul, feel free to delete if this post does not belong here.
1. Their numerical success vs. the S&P seems inflated. First, it is overall performance over almost 20 years. Second, it is very much bolstered by the enormous success of very few companies (e.g., AMZN).
That should not come as a surprise, it’s the Pareto distribution at work, 20% of the stocks produce 80% of the returns or some such ratio.
I don’t remember which investor did this but here is how someone ‘tested’ SA:
They invested $1,000 on EVERY bi-weekly pick for 5 years. They ended up with 200%
Now I don’t have the source anymore, but at the time it seemed to be a reputable website. After reading MANY reviews around the web, this was one the one that ‘sold’ me into paying for SA.
2. Conflict of interest. On the one hand, I would want the person telling me how to invest my money to be personally invested in the same opportunities. But, if they invest in a particular stock at a lower price, wouldn’t it improve their own ROI if they get a bunch of other people to then invest in the same stock? And wouldn’t they sell their own holdings before providing the sell signal to their subscribers?
Actually, they have rules about when they are allowed to invest. For the Discovery services in particular, MF does not invest its own money until after the subscribers have had a chance to buy the recommendations. I am sure a similar rule applies to Stock Advisor, though I am not sure on the exact details. MF is a buy and hold service. They invest for the long term.
My first year with self-directed 457b plan and SA I was 33% YTD 2019.
Then I get clever for 2018 and although I had discovered Saul et al I bought marijuana and solar stocks: 28% YTD 2018.
Then I started reading the Knowleagebase and the great end of month posts by Saul and his compadres. 60% YTD 2019.
2020? First and only thing I thought when the covid hit NYC: “oh geez that is where Saul lives. I hope he is staying safe”.
I believe Saul is a big fan of David Gardner. And he uses David /RB/SA to find new winners.
I am also a scientist by training, and a long-time Fool member (note that I am a contractor – I am not an employee nor an analyst). I share your data-driven “reality” approach to life.
Let me point out to you that Stock Advisor and Rule Breakers are “idea services”; they are not real money portfolios. So, the results quoted are less meaningful than the real portfolio services (i.e., the various Discovery services, the Everlasting Portfolio, and Supernova). But the important point is that there is no conflict of interest for Stock Advisor, since Stock Advisor owns no stocks.
But, for those real-money portfolios, the Fool always announces the recommendations and allows members to purchase before the portfolio buys. Thus, members often get better prices than the Fool gets (there is a real thing called the “Fool bounce” following a recommendation). This transparency and members-first approach is rare, if not unique among stock services. So, again, no conflict of interest.
David has had historically better returns than Tom for some of the same reasons Saul has – he invests in high-flying, high-beta, fast-growing companies that are on the cutting edge of technology. Tom has started to invest more “David-like”; in fact, the discovery services are Tom’s angle of David-style investing. And, in his Everlasting Portfolio, he has focused a lot more on the smaller, fast-growing companies the past two years. BTW, Tom’s personal holdings are only taken from the Everlasting Portfolio, aligning his success with the service’s success.
But this board is indeed a gem. The collaborative spirit and discipline found here are unique in Fooldom. This is a great place to learn!
Tiptree, Fool One guide
Thank you all for taking your valuable time to respond and add clarity! I feel better about my roadmap.
I have noticed another factor in Motley Fool performance. In the late 1990’s the David Gardner recommended his 8 favorite companies. As their membership has grown David and especially Tom has advocated buying more stocks. The first increase I remember is to 15-20 stocks. Then it went to “at least 20-30” stocks. Some of the Discovery portfolios now plan on 40 or more stocks and recommend we buy all of them.
It was probably necessary with the number of Fools there are now but it dilutes the performance.
I’ve been retired since 1999 so I have to sell something whenever I buy. I’m trying hard to develop the discipline to sell like Saul. I still hold ROK, the first stock I bought in 1976!
I love this board but most of my portfolio is companies and funds I bought before The Motley Fool was founded.