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Here are the latest performance stats for all the Motley Fool services, since their inception. The returns are calculated using the official methodology of each of the services, per the Motley Fool site.
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A Drop and a Rebound
The market hit some turbulence this month. The S&P 500 was down -6.5% this month, but that includes a quick bounce off it’s low on the 25th (at which point it was down -11.7% for the month). The Russell 2000 was down -7% in August and experienced a similar bounce as well. This was the correction people had been predicting for quite a while. But the worst of it was over pretty quickly.
I’ve been curious to see how the Motley Fool services would react during a correction, and now I have that opportunity. So I calculated the month over month changes of the Absolute Returns for each of the services as you can see in the chart below. Every single service experienced a drop in March greater than the S&P500.
Now you could call David Gardner’s side of Stock Advisor and Inside Value a draw, as they are within half a percent, but I was surprised that not even a service like Motley Fool Pro did better than the benchmark.
Speaking of Pro, for a service whose whole reason for existence is its hedging and allocation strategies, it fared on par with Hidden Gems which specializes in small cap stocks which are generally the most volatile stocks. Similarly as alarming, Supernova Phoenix which is a portfolio geared toward retirees, experienced a double digit drop of -11.8%. It’s overall performance vs. the S&P is the best of all the Motley Fool portfolio services, yet that performance is coming at the expense of a lot of volatility. Those of you looking to Phoenix for portfolio protection should pay particular attention to that.
So which service experienced the worst drop? Well look at that: Special Ops. What a shock, right? Those of you have read my previous posts on the horrible underperformance of Special Ops will recognize my sarcasm here. Part of Special Ops strategy is in theory to provide returns that are uncorrelated to the typical benchmarks like the S&P 500. And it seems to be achieving that goal: massive under performance vs. the index during the worst stretches, with absolutely no participation in the upside of the market. Uncorrelated, indeed.
The typical response would be that these services are meant to be for the long term, and that you shouldn’t judge performance over the course of one month. And I agree with that. And I will point out that both MDP and Everlasting Portfolio took advantage of the correction to issue opportune buy orders, so they should get credit for that. But for those of us who invest alongside the Motley Fool, it’s important to understand the volatility you will experience investing in even their most conservative portfolios. Many of their services provide great returns, but as noted with Phoenix, realize that their portfolios are not protecting you against the corrections that inevitably come.