A Monday Morning Millionaire Program member recently stated: “I have been a subscriber to the Motley Fool to for over 20 years, and have profited from their suggestions.” That comment prompted today’s blog. Objectively, the Motley Fool record is not nearly as good as their marketing department would have us believe, understandably and true of most marketed goods and services. The highly regarded Hulbert Financial Digest placed the Motley Fool in the number 3 spot out of some 200 newsletters. The Motley Fool does employ about 300 people so, yes, they are a successful organization from a corporate perspective.
How successul are their followers?
The point-form elevator pitch which follows is all you need to read to get the message. For details, read the entire blog.
- Investment advisory newsletters are popular. There are many.
- Investment advisory newsletter quality is all over the map.
- The Hulbert Financial Digest rates investment advisory newsletters. It is an excellent source of information for interested investors.
- It is possible but unlikely that studying the Hulbert Financial Digest will improve on the passive (indexing) performance which the Monday Morning Millionaire Program recommends.
- To have a meaningful impact on a portfolio, a buy or sell decision must involve a large percentage of that portfolio. This is a crucial point.
- Even the best and most respected newsletters occasionally make poor recommendations.
- Making a major commitment based on a poor recommendation could wipe out a portfolio.
- Carefully studying investment advisory newsletters will definitely improve one’s cocktail party conversations. It is possible but highly unlikely that it will improve on the performance of the Monday Morning Millionaire Program approach to investing.
Long before the Internet protocol suite or Mark Hulbert’s respected Hulbert Financial Digest in 1980, I was spending about $20,000 a year subscribing to any and all investment newsletters that I could find. I reasoned that if I could find some consensus on a buy recommendation, I could act on it profitably. Not surprisingly, there was no consensus. Every buyer needs a seller who has an opposing view about the prospects of any security.
Further, it soon became evident that some of the newsletter authors were semi-literate. Additionally, many would simply remove losing recommendations from their model portfolios to make them look better. There was no agency regulating who could write and what could be written.
That is still the case today. Investment newsletter authors are not governed by any central regulatory agency. A high school student working from his bedroom could run an investment opinion blog.
So could dentist with no investment qualifications. Me, for instance. However…
- I have been investing in the stock market for over 50 years, the last 30 with confidence.
- I am proud of my investment record and display it (as reported by my bank). To be believable, all with investment opinions should show their personal portfolio performance.
The above points give me credibility and a reputation which I guard jealously. Now back to investment advisory newsletters.
Investment advisory newsletters are often written by great analysts who share their knowledge with others for a few hundred dollars a year. However, even the best of them can make serious errors in judgment. Many were rating Enron a buy, even a strong buy just before its infamous collapse in 2001. Now, to have any significant impact, any buying or selling within a portfolio needs to be a large percentage of that portfolio. Many held such positions in Enron. Overnight they went from wealth to poverty. Many worked for Enron and were on in years with poor prospects of recovery. These tragedies of epic proportion simply cannot happen to passive index investors like Monday Morning Millionaire Program members.
The Monday Morning Millionaire Program guarantees that members will equal the performance of the American economy with half the risk, minus a negligible transaction cost. Over the last decade, that approach has outperformed over 95% of portfolios including professionally managed ones. Will it do so in the coming years?
Rosi’s and my retirement is based on that assumption.