Motley Fool Performance – March 2014

Motley Fool Performance – March 2014 4.02/5 (80.45%) 44 votes

Here are the latest performance stats for all the Motley Fool services, since their inception. Not all of these are available on their public site.

The calculations follow the official methodology used by each of the services.

Check the Performance category posts on the right to see if more recent stats exist.

If you find these helpful, please take a second to rate the content by clicking on the stars below. You can also leave a comment or sign up via email to follow my blog and receive regular updates. If I get enough feedback that my readers find this sort of information, I will provide updated performance stats on a regular basis. Also, please people, let me know what you want to see more of in the way of stats.

Performance Highlights

March was a mixed bag for the market. It felt more volatile, but the S&P was actually up slightly for the month, while the Russell 2000 (an index for Small Cap equities) was down, but only slightly. But as you will see below, the Motley Fool services generally took a step back as growth and momentum stocks felt the brunt of the volatility.

But even as services like Rule Breakers, Million Dollar Portfolio, the Everlasting Portfolio, and Supernova took big hits in their performance vs. S&P in March, the Income Investor and Inside Value services maintained their steady performance trends.

But I would highlight that almost all of these services continue to outperform the S&P over the long term, even as they take these steps backwards. And as I suspect that April and maybe even the next couple months will bring us even more volatility, it might be more prudent to focus on the “Hold” part of of “Buy and Hold”, and wait for the market to settle a little bit before investing too much new cash, especially in growth and small cap stocks.

 

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MF Performance Stats - 2014-03Mar

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More Details on Motley Fool One Separately Managed Accounts 3.80/5 (76.00%) 5 votes

Motley Fool One continues to release more information related to their newest Wealth Management feature: Separately Managed Accounts (SMA’s). Recently they revealed minimum portfolio sizes for their SMA counts, as follows:

  • Motley Fool One Everlasting Portfolio: $35,000
  • Supernova Odyssey: $25,000
  • Supernova Phoenix: $35,000
  • Million Dollar Portfolio: $45,000
  • Motley Fool Pro: $300,000

As I’ve stated in the past, given the prices of Motley Fool One, you’d need a portfolio of at least $100,000 for the membership to be worth the cost. So the above are really bare minimums to participate and not practical portfolio sizes. The much larger $300,000 limit for Pro is due to the complexity of the strategies they employ.

You are also able to set up more than one SMA, so you could also allocate some of your account to multiples of the above, subject to the minimums of each.

Members are able to transfer over existing taxable accounts or IRA’s (including Roth IRAs), but not any employer sponsored accounts such as 401k’s. If any of these accounts hold existing stocks that are not part of the portfolio SMA that you will be following, those stocks will automatically be sold. So if you are considering participating in an SMA, make sure you keep this in mind.

And finally, although IRA’s can be accepted, the Motley Fool suggests using taxable accounts, because IRA’s often have contribution limits which could prevent you from following all the trades.

Let me know if you have any additional questions, and I’ll see if I can answer them.

 

 

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Is Motley Fool A Scam?

Is Motley Fool A Scam? 3.00/5 (60.00%) 5 votes

Is Motley Fool A scam?

Apparently that is a question on a lot of people’s minds out there. I know this because when I review my website metrics for what phrases people are googling (or binging or yahoo’ing or otherwise searching the Web for) when they find my site, that phrase shows up with surprising regularity. When I first saw it I admit I laughed a little bit, but after more than a year of running this site, the phrase continues to show up with alarming regularity, and it got me to thinking.

The term “scam” is a highly charged word, particularly as it relates to financial or investing services. To call the Motley Fool a scam is to accuse it of the worst crime imaginable to a possible investor – namely, that it will knowingly cause you to lose money through deceit and misrepresentation.

This is much different than asking whether the Motley Fool is any good or worth your money. Those are reasonable questions that any informed consumer asks themselves. However, to ask if they are a scam infers a lack of trust from the get go. It’s a question that already assumes some level of guilt on the part of the Motley Fool. And for a service that prides itself on transparency it begs the question what are they doing wrong that people perceive them as a possible scam? I’m pretty sure I know the answer.

No, the Motley Fool Is Not a Scam

So let me say right off the bat that Motley Fool is not a scam. As a member for 7 years, I can unequivocally say that the Motley Fool has some of the most customer friendly policies I have ever experienced in my life, to the point where I wonder sometimes how they are able to not only stay in business, but apparently thrive. Every one of their newsletter services offers a month long trial membership whereby you get full access to the service and can get a full refund after 30 days, no questions asked. Many of their premium services offer a full 1 year money back guarantee – not a prorated amount, but a FULL money back guarantee. I have said this before but I have been a member of their most expensive Motley Fool One service for just under a year now, and I could call them up right now and get every single penny back. What other business out there provides such generous terms?

What about the quality of their services? Motley Fool is not for everyone. They are long term buy and hold investors; they are not active traders. That style can be frustrating for some, especially when one of the first Motley Fool recommended investments they make loses a bunch of money right out of the gate. But their performance is generally very impressive, as my monthly performance reports show. Sure there is some survivorship bias here as some of their less successful services have been shut down and don’t show up in their performance statistics. And you can argue forever about whether their use of average returns since inception versus the S&P is the best performance metric (sort of like arguing about who is the greatest baseball player of all time) but it’s undeniable that they have had great success. And the Hulbert Financial Digest recently named 3 of their newsletters as the top 3 investment newsletters out there. So they must be doing something right.

But Wait There’s More! Act Now And Get a Free Toaster

So why do so many people need to ask the question as to whether Motley Fool is a scam or not?

Whenever I tell my friends or family about how great the Motley Fool is, and refer them to a sign up page, I usually get the same response: “Are you sure? Their marketing sounds so cheesy. I feel like I’m watching a late night infomercial.” At which point I am put in that uncomfortable situation of having to make excuses for them like when you bring around that new girlfriend that your friends don’t really like: “I promise she’s a really great person – once you get to know her.

But they are right. Motley Fool marketing is embarrassingly hyperbolic. Their marketing campaigns are riddled with phrases like “we will reveal the once in a lifetime investment opportunity that could literally revolutionize everything you thought you knew about transportation” or “apply quickly to see if you are one of 1 in a 1000 applicants qualified for our new one of a kind service” or “find out why we think this recommendation that has already returned over 1000% could still return another 1000%”. These are the high pressure, “promise the moon” marketing tactics of get rich quick scams. This is the language of penny stock purveyors and not the language of the intelligent, thoughtful, dedicated, and actually likeable advisors and team members who work at the Motley Fool.

The over the top marketing has been a subject of many posts on the Motley Fool boards, with many other long time members voicing similar complaints. In response, some of the Motley Fool advisors have alluded to also being unhappy about the approach as well but stated basically that the marketing department is separate from the investment services and beyond their control.

But ultimately that marketing team rolls up to the CEO, Tom Gardner, co-founder of the company. Tom and David Gardner both cherish integrity in the leadership teams of the companies in which they invest. Most of how they run their own company reflects this.

So why do they then allow these over the top, marketing campaigns that actually undermines the trust they seek to build and the great work done by their investment advisors? I can only conclude that the marketing must be wildly successful. Why else would they take that approach unless it works to brings in a ton of revenue for them?

Ultimately the Motley Fool is a business and I accept that their marketing must build excitement and attract customers. But they should take a lesson from one of their favorite CEO’s, Steve Jobs of Apple, whose marketing inspired the unrivaled loyalty of legions of fans without coming on like a used car salesman. After all, the Motley Fool is actually a great investment service – once you get to know them. 

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Motley Fool One Prices: March 2014

Motley Fool One Prices: March 2014 3.41/5 (68.24%) 17 votes

Here are the latest Motley Fool One membership costs, as of their March 2014 membership drive:

  • 1 year membership: $7,999/year
  • 2 year membership: $12,999 ($6,500/year)
  • 3 year membership: $15,999 ($5,333/year)
  • 5 year membership: $17,999 ($3600/year)

They also offer a $1000 early acceptance discount, and even more valuable, a 1 year FULL money back guarantee on all of the memberships (yes that includes the 1 year membership, so you could in effect use the service for free). Plus if you are an existing subscriber to any of their other services, you can count that cost against the Motley Fool One cost.

The prices continue to increase with each new membership enrollment, particularly the 5 year memberships. Last October, the cost of a 1 year membership was $7499, so they have increased that now by $500. However, the price of a 5 year membership has gone from $14,499 to $17,999 which is a full $3500 increase (which is $700 year). It is quite a steep increase but they are adding a potentially very valuable SMA service to the Motley Fool One offering. So at least the hike comes with additional benefit. Read my post here about why I think that new SMA service could be a game changer. But it nevertheless makes this much more of a premium service, catering to those with large portfolios.

Read all my Motley Fool One coverage here. And follow me on Twitter at @motleyfoolrview.

 

 

 

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Motley Fool One is opening up its membership next week, and they are also introducing an intriguing new feature, exclusive to their members: Separately Managed Accounts (SMA’s).

From their FAQ:

“A separately managed account is an account at Interactive Brokers in which Motley Fool Financial Planning does the investing for you, following the strategies of the Motley Fool real-money portfolio service(s) that you choose, including Motley Fool Pro, Million Dollar Portfolio, Supernova: Odyssey 1, Supernova: Phoenix 1, and Fool One‘s Everlasting Portfolio.”

So basically, you open up an Interactive Brokers account, transfer in money and/or existing equities, choose one or more of the premium services to follow, and they will execute the exact trades on your behalf, based on percent allocations to match your portfolio size. Other than standard trade commissions, there will be no additional fees beyond the Motley Fool One membership. And only equities that are part of those services can he held in the account, as I understand it (so if you own a Uranium penny stock that your Uncle recommended, you can’t hold that here).

Members and potential members have been requesting this feature for a long time apparently, either because they don’t have the time to manage their own accounts (or don’t want to spend the time) or lack the comfort level or conviction to execute their own trades, and would rather have the Motley Fool facilitate all the transactions on their behalf.

Possible Game Changer for the Motley Fool

What’s interesting about this feature is that I think this opens up a potentially vast new market for the Motley Fool. Previously, Motley Fool One was best fit for fans of the Motley Fool and/or people who wanted to spend a lot of time researching and managing their own investments. Members had access to a ton of content, and but you had to filter through the information and trades that were of interest to you. So unless you were a general Motley Fool fan, Motley Fool One was not a very efficient way to manage your investments. Many people were paying money to a financial advisor to manage their investments in addition to their Motley Fool memberships.

Now with these SMA’s, the service will appeal to a much larger audience of people who can compare the cost of a Motley Fool One membership to the fees they are paying their own financial advisors. With typical SMA fees running at about 1.5% or more of assets under management (i.e. portfolio size), anyone with a portfolio of around 250,000 suddenly has a probably lower cost alternative (assuming a Motley Fool One membership cost of approximately $2500/year). Suddenly the cost of Motley Fool One can be not in addition to their Financial Advisor fees, but instead of them. The access to everything else Motley Fool One offers would just be icing on the cake, and the service would still be cost effective even if those members didn’t avail themselves of any of it.

So this could be very good for the Motley Fool bottom line, and also a good deal for members who want to take advantage.

Let me know in the comments if this feature is something that would be of interest to you.

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Motley Fool Performance – February 2014

Motley Fool Performance – February 2014 3.73/5 (74.55%) 11 votes

Here are the latest performance stats for all the Motley Fool services, since their inception. Not all of these are available on their public site.

The calculations follow the official methodology used by each of the services.

Check the Performance category posts on the right to see if more recent stats exist.

If you find these helpful, please take a second to rate the content by clicking on the stars below. You can also leave a comment or sign up via email to follow my blog and receive regular updates. If I get enough feedback that my readers find this sort of information, I will provide updated performance stats on a regular basis. Also, please people, let me know what you want to see more of in the way of stats.

Performance Highlights

The market recovered in February, with the 10% drop that pundits have been predicting for about a year now, still yet to happen. The last time the S&P dropped 10% was a 19% drop in October 2011, and historically they occur once a year, so by that trend, we are overdue. But if you sit on the sidelines waiting for that drop, you miss out on all the gains in between.

After a year of publishing these performance posts, the month to month story tends to remain the same. The winning growth-oriented services keep winning, the “too clever by half” losing services tend to keep losing, and the conservative value-oriented services eek out solid consistent returns.

The biggest winners across the last 12 months have been the 2 Supernova portfolios as well as the Everlasting portfolio.They were outperforming the S&P by low single digits, and now outperforming by 28 points for Phoenix and the Everlasting portfolios, and 38 points for Odyssey. These are the youngest services at Motley Fool and shows the value of the long term, buy and hold approach.

MDP Deep Value and Special Ops are digging themselves deeper and deeper holes throughout a great bull run. I personally am putting Special Ops on a death watch list, and won’t be surprised to see the plug get pulled on this poor performer.

 

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MF Performance Stats - 2014-02Feb

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Motley Fool One Opening Up to New Members on March 20th, 2014 3.44/5 (68.89%) 9 votes

Motley Fool One is opening up their service again on March 20th in similar style to the previous few opens, complete with their over the top, infomercial style marketing, the facade that they are individually reviewing applications, the usual application questionnaire, and the members lobby with some content as well as an FAQ. 

Pricing details will be released on March 20th as well if history is any indication. 

There is one new feature that is being teased that has previously not been available in MF One. Their application questionnaire and FAQs indicate that they are likely to include the ability to automatically invest in recommendations made by their premium services without you as a member needing to do anything.

This auto investing feature seems interesting but a little ambitious in my opinion for a company that has never had the strongest technical infrastructure and whose financial planning features released last year left a lot to be desired.  But details are not yet available on the feature so it would be premature for me to comment. 

Once I learn more I will post details here.

Subscribe to my blog to get the latest updates on all Motley Fool services and follow me on Twitter (@MotleyFoolRview). 

And in the meantime, check out all my Motley Fool One content here, especially the one year review I just posted about my own experience thus far.

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Motley Fool One – 1 year review

Motley Fool One – 1 year review 3.50/5 (70.00%) 12 votes

Motley Fool One is the premier investment service offered by the Motley Fool. It’s the baby of Tom Gardner, the CEO of the Motley Fool, and has its roots in Duke Street, which was a more streamlined version of the service.

I’ve been a member of the service since March of 2013, the last time they opened up the membership to the public. Now at the 1 year mark, I figured it was a good time to take a step back and evaluate my experience. They are also opening up the service again in March 2014, so perhaps my review will be helpful to those of you considering signing up this time around.

For a quick view of whether Motley Fool One is right for you, see my post from last year: Is Motley Fool One Worth It?

All-Access Pass

As part of Motley Fool One, members can access every service Motley Fool offers. This to me has always been, and still is, the key selling point of Motley Fool One. You get full access to each and every newsletter, research report,  interview, and trade recommendation that Motley Fool offers. One day you can read up on the latest strangle options trade from their Motley Fool Options newsletter, and the next day learn how to hedge your portfolio via shorts in Motley Fool Pro, or study up on the nuances of MLPs in James Early’s Income Investor.

Being the investing junkie that I am, I have been making full use of this unfettered access, and have been exposed to investment ideas and strategies I wouldn’t necessarily have considered otherwise. And since some investment recommendations overlap across multiple services, you get the benefit of extended coverage and multiple viewpoints of those recommendations. This access has already borne tangible fruit for my portfolio. For example, a few months ago I executed a short term options trade on a highly volatile stock recommended by Motley Fool Special Ops that I wouldn’t have otherwise felt comfortable pulling the trigger on without getting additional analysis from the Special Ops team. I’ve also invested money in a European stock recommended by Inside Value that’s up 19% already in just a few months. A few more option trades or investments like this and the all-access pass will have covered the cost of membership itself.

I would say 80% of my use of Motley Fool One has been this all access pass, and I’ve been very happy with it. That being said, it’s sometimes difficult to keep up with all the content and updates and I have found myself recently being much more selective in what I read. They do offer customization options whereby you can choose what content and updates you receive, so that can help you if you start feeling overwhelmed.

“Top Recs” & “Best of the Best Buys”

Motley Fool One has 2 features which attempts to curate the top recommendations across all the various Motley Fool services.

The Top Recs is a monthly feature where the Motley Fool One team ranks the best investment recommendations across all their services. The Best of the Best Buys is a quarterly feature which is similar to the Top Recs feature but provides a shorter list of recommendations with more in depth write-ups on those picks.

If you don’t closely follow all of the Motley Fool services, these two features are an easy way to get exposed to a ranked list of all the trades the Motley Fool has recommended. At some point, I will run an analysis to see how these “Top Recs”  and “Best of the Best” have performed, but for now, I only casually peruse these lists, not making any trades based strictly on what they post here. If my analysis turns up anything interesting, I’ll post it here on my site.

But this is an example of where members can get confused by how to use Motley Fool One. For example, if these are the best recommendations across all the services, why not invest in these stocks as opposed to the Everlasting Portfolio? And if a member follows the Pro Portfolio, should they try to invest in some of these recommendations as well? There are 2 schools of thought here: one is that the more information made available, the better informed you will be as an investor. The other is that this proves Motley Fool One is unfocused and just throwing up hundreds of trade recommendations to see what will stick. Personally I am in the first camp, and appreciate the additional inputs. But if these lists were to go away, I wouldn’t consider it a big loss.

Everlasting Portfolio

The Everlasting Portfolio is Tom Gardner’s portfolio of stocks that he intends to hold for the “ultra-long term”. They invest $100,000 each quarter in 5 stocks equally. Tom also invests his personal money in these same stocks, and has committed that these will be the only stocks he will ever own, and pledges to hold all stocks for at least 5 years. Although the portfolio’s performance has vastly improved over the last few months, I’m taking a wait and see approach and I have not made any investing decisions purely on what they are doing. Some of my personal investments do overlap with theirs however, and so it is helpful to get the additional coverage they provide on those stocks. Basically I use the Everlasting portfolio as another data point to guide my own investments.

Ayco Financial Planning and the Financial Planning Tool

So I will be honest that I have not really used these aspects of the Motley Fool One service. A lot of fanfare was made about the addition of this service (details described here) during the last membership drive, but it was never a draw for me. I did try to use the Financial Planning Tool when I first joined, connecting my brokerage accounts, and entering all the other manual inputs, but I found the process clunky. Then the system spit out its so-called personalized trade recommendations for me, and I did not find them helpful at all. It wanted me to sell most of my bond holdings and go almost entirely into equities. The equities trades the tool recommended also seemed to pick from the most risky of the Motley Fool recommendations. Then the Motley Fool One team followed up with a lot of announcements about how they would improve the tool and the recommendation engine, soliciting a lot of feedback. I am not sure why the Motley Fool released a financial planning tool that they acknowledged still needed a fair amount of development. Based on my brief experience, I would go so far as to say leaving the tool open to their members bordered on irresponsible. After a couple months and hearing that they had made a lot of improvements to the tool, I decided to give it another shot. However I immediately ran into some technical glitches, and it turned me off to the tool and I gave up.

So this aspect of Motley Fool One is a failure from where I stand.

I haven’t bothered to go back into it the last couple months, but will keep an ear open to see if they make substantial improvements.

In terms of the Ayco Financial Planners that members can access, I have yet to make a call to them. I’ve heard some positive things about the service however, but I have not yet been compelled to utilize it. There are a few financial planning questions I could ask them, but I never got around to it. It occurred to me that I should call Ayco before writing this review, but I think the fact that I have not felt compelled to call them, says something in itself. But again, you may find this more useful, depending on your needs.

Other Items

I really like the EP One weekly audio podcast. Similar to the publicly available Motley Fool Money and Market Foolery podcasts, they cover investing highlights of the past week, often doing deep dives on a particular Everlasting Portfolio company or macro investing topics. Hosted primarily by Chris Hill and Jason Moser, it’s a nice, tight format, and the content is useful, and even entertaining at times. It’s a small part of the service but one of my favorites.

Is Motley Fool One worth it?

That of course is the most important question, and at the end of the day, the most difficult to answer. I think it very heavily depends on personal circumstances and interests. For me, yes, it’s been worth it, even though I’ve so far been using limited pieces of the service. As mentioned above it has benefitted my bottom line, and maybe more importantly, I am constantly learning something new.

I think the key from a cost perspective is signing up for the longest term membership available. It’s a bigger up front investment, but if you amortize the cost across a number of years, it makes a lot more sense. Alternative, and less expensive, portfolio services I would recommend are Motley Fool Supernova for beginner to intermediate level investors, or Motley Fool Pro for advanced investors.

I’m still within the limits of my one year money back guarantee. So if I chose, I could cancel today and get all my money back (which in and of itself is an amazing perk they offer!). But I am satisfied enough with Motley Fool and Motley Fool One that I will keep my membership.

Make sure to check out my performance posts here to see how the Everlasting Portfolio has done. And let me know if you have any questions in the comments section below.

And take a look at some of my favorite investing books and blogs here.

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Supernova Performance vs. Stock Advisor and Rule Breakers 4.25/5 (85.00%) 8 votes

Is Motley Fool Supernova Worth It?

One of the main questions I get from my readers is “Is Motley Fool Supernova worth it?” Given that Supernova only invests in stocks that were previously recommended in either Rule Breakers or David Gardner’s side of Stock Advisor, it’s reasonable to wonder whether you would be better off just buying a subscription to Rule Breakers and/or Stock Advisor (currently at a price of $299/year and $199/year respectively) versus shelling out ~$1500/year for Supernova.

The following analysis attempts to answer that question.

Background

Supernova was created in March of 2012. The idea behind the service was to create various real money portfolios based solely on David Gardner’s picks from Rule Breakers and Stock Advisor. In theory you get the benefit of a team of advisors who are able to pick the best of all of David Gardner’s prior picks, with more flexibility to buy and sell, and perhaps most importantly, the ability to provide allocation guidance in building these portfolios (for more information on Supernova, read my detailed review).

The Analysis

I wanted to tackle the question of “Is Supernova worth it?” in a practical, real world way. So I looked at every single monthly recommendation that Stock Advisor and Rule Breakers have made since Supernova’s inception in March 2012, and looked at how much money would an investor have if they invested $1000 evenly in each of those recommendations.

I did the same with Supernova Odyssey and Phoenix picks as well, so that I could do an apples to apples comparison using my mechanical investing methodology, for the sake of this analysis.

I also calculated how much the same investment in an S&P index ETF (specifically State Street’s SPDR SPY) would be worth. I chose the SPY because it is an actual vehicle that you can invest in, and so can be considered a true alternative to active stock picking.

Finally, I wanted to compare that with the actual returns that Supernova has achieved, per the official website.

The Results

Supernova Performance vs. Stock Advisor and Rule Breakers

The first thing you can see is that using my mechanical $1000 per recommendation methodology, both Supernova portfolios underperformed Rule Breakers and Tom Gardner’s Stock Advisor recommendations, but outperformed the overall Stock Advisor results as well as the David Gardner Stock Advisor recommendations.

The other thing that jumped out at me was that David Gardner’s Stock Advisor recommendations fared the worst. Given his outsize performance on the SA scorecard since its inception, it is surprising to see he underperformed his brother so drastically in the last 22 months. Does that mean David Gardner is losing his touch? I’m not sure that’s the right conclusion. David’s picks tend to differentiate themselves over a 3+ year holding period. With the picks in this analysis having an average holding period of less than 1 year, it might be premature to judge him that quickly.

Another quick observation is that every service outperformed their S&P benchmark, illustrating that there is a benefit to active stock picking, at least if you are following the Motley Fool.

At the bottom of the table I included Supernova’s official results, per their website. You’ll see their results are different than what I calculated, and that can be attributed to their allocation decisions, as well as a couple of sell decisions that they made, which my mechanical methodology doesn’t account for. Based on those returns, you still would have been better off just following Tom Gardner’s Stock Advisor picks, and even slightly better just following Rule Breaker picks. But again, Supernova offered much better results than David Gardner’s side of the Stock Advisor scorecard.

Factoring in Costs

None of the above takes into account the price of membership. The common rule of thumb is to keep your transaction costs to around 1-2% of your investments. That typically applies to the cost of commissions when you buy or sell a stock, but membership costs can be treated in much the same way.

So in my mechanical investing examples, what if you back out the cost of membership? At $3000 for Supernova ($1500/year for 2 years, approximately equal to the 22 months of trades I analyzed), this represents 4.4% of the 68K invested in Odyssey, and 6.4% in Phoenix, significantly higher than the recommended 1-2%.

Similarly, if you back out 2 years of costs for Stock Advisor ($398) this represents 0.9% of the invested amount; and for Rule Breakers ($598), it would be 1.3%. This is more in line with the guideline.

In that light, Rule Breakers’ performance lead (vs. the S&P) grows to almost 8 points versus Odyssey and 14 points versus Phoenix. And Stock Advisor’s overall performance versus Odyssey is now only 2.3 points lower, and actually outperforms Phoenix by 4.2 points.

Keep in mind this assumes you are investing roughly $2000/month which is not practical for many people. If instead you only invested $1000/month ($500 per recommendation), the membership cost eats even more into your return, and Supernova’s performance versus the other services suffers the most.

Conclusions

I want to preface my conclusion by saying that 22 months is not a very long time over which to judge the success of an investment, particularly when evaluating the Motley Fool, as their investment philosophy advocates holding stocks for at least 3-5 years. But I do think 22 months, with at least 44 recommendations in each service, provides enough data to begin taking a look.

In that timeframe of just under 2 years, the majority of which has been a bull market, each of the services performed very well. And if you compare the official Supernova results versus my mechanical approach for Supernova, their results are better and that can be attributed to the allocation decisions the Advisors for those services have made. So there is some value-add displayed there for sure. However their results vs. the other services are not as clear cut.

I think the only way to really answer the question “Is Supernova worth it?” is to factor in the size of your portfolio and the cost of membership. As the overall amount of money you have to invest gets smaller, the more the membership fee eats into your gains. Despite Supernova’s superior results, at a certain portfolio size, that cost becomes prohibitive and Supernova becomes “not worth it”. That being said, you can mitigate some of that cost by signing up for a long term membership, which drops the annual cost considerably.

My conclusion also ignores any of the qualitative factors involved in calculating the worth of the subscription, such as access to additional analysis and content (e.g. new missions like the recent Explorer mission). But on the basis of performance alone, I feel Supernova is more suited for investors with a larger portfolio.

If the market turns downward for any sustained period of time, perhaps Supernova’s portfolio management will be a real advantage and help buffer investors from prolonged underperformance, but that remains to be seen.

Of course, simply investing in the SPY ETF would have earned you nice returns as well, without any significant fees or commissions, and no time spent keeping up with the Motley Fool services. For many investors, this might be the best approach.

in Performance, Rule Breakers, Stock Advisor, Supernova

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Motley Fool Performance – January 2014

Motley Fool Performance – January 2014 4.25/5 (85.00%) 8 votes

Here are the latest performance stats for all the Motley Fool services, since their inception. Not all of these are available on their public site.

The calculations follow the official methodology used by each of the services.

Check the Performance category posts on the right to see if more recent stats exist.

If you find these helpful, please take a second to rate the content by clicking on the stars below. You can also leave a comment or sign up via email to follow my blog and receive regular updates. If I get enough feedback that my readers find this sort of information, I will provide updated performance stats on a regular basis. Also, please people, let me know what you want to see more of in the way of stats.

 

Performance Highlights

The markets in 2014 got off to a rough start, with the S&P down about 3% for the month. But coming off such a strong 2013, a sudden 3% jolt is a lot like a paper cut: it feels really painful, but it’s not going to do you any permanent damage. That said, it was a taste of the correction that everyone has been forecasting for about a year now, and if a full 10% drop does materialize, we’ll see how the Motley Fool services perform in that environment.

Not surprisingly, all of the Motley Fool’s services absolute returns dropped slightly in tandem with the market. Motley Fool Pro, which employs a number of hedges (see my new in-depth write up on Pro here) experienced a small 1% drop, which is one of the advantages of a service like that. Interestingly though, one of the more volatile services, Rule Breakers, also only experienced a 1% drop, thanks to some strong results from their recommendations. Special Ops, my favorite whipping boy, lost half of it’s absolute returns, dropping from 14% to 7%. They pride themselves on making investments that don’t correlate to the markets which was their excuse for lagging the S&P by over 60 percentage points while the markets roared upwards, but in the first down month, their performance isn’t holding up well either. The question still remains a year later, when will their investments start to bear enough fruit to offset the opportunity cost of just putting money in an S&P index fund this whole time?

Looking at the performance relative to the S&P, you see a mixed bag of results. On the portfolio side, you see Supernova Odyssey, Million Dollar Portfolio, and the aforementioned Special Ops giving back some of their outperformance, while the Everlasting Portfolio and Supernova Phoenix actually gained position. On the recommendation services side, only Rule Breakers managed to gain a lead. Income Investor remained steady with a 10% outperformance.

 

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MF Performance Stats - 2014-01Jan

in Performance

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