The only reason that you start buying individual stocks is if you think that you are going to beat the market.
The S&P 500 generally returns about 10% year after year, and so you if you want to match that return you can buy index funds or index ETFs.
However, if you want to BEAT THE MARKET and really increase your portfolio value year after year, you should consider subscribing to one of the Motley Fool services: Stock Advisor or Rule Breakers. But which is the best service? Each of these services, going back to their launch dates of 2002 and 2004 respectively, have consistently outperform the market year after year.
This article is about the difference between the Motley Fool's Stock Advisor and Rule Breakers services. I have been a subscriber since January 2016 to both of these services. Most importantly, I have purchased about $2,000 of EACH of their stock picks in 2 separate ETrade accounts so I will also show you how they have performed for the last 5 years. See my performance summary tables and my ETrade screenshots below.
The Motley Fool Advertisements
If you have been on any financial website in the last 15 years you have probably seen their ads.
For example, as of October 29, 2021, Stock Advisor claims their stocks are up 680% versus the S&P500's 142% since inception in 2002.
And as of October 29, 2021 Rule Breakers claims their stocks are up 376% versus the S&P's 120% since inception in 2004.
That means that whatever you get from this article you should walk away knowing that both Stock Advisor and Rule Breakers have an excellent HISTORY for beating the market with individual picks.
Based on those 2 images, it appears that Stock Advisor is the better service.
But you should be asking yourself the following questions:
- Which Motley Fool service is best?
- What are the differences between Stock Advisor and Rule Breakers?
- And more importantly, how have they performed RECENTLY?
So let’s look into the different objectives of each, let's review their recent performance, and let's find the best one for you!
There are two brains at the core of Stock Advisor.
The co-founders of The Motley Fool, Tom and David Gardner, each work with their own great team of analysts to pick a variety of stocks for this service.
Each of the two teams recommends a new stock for the subscribers to buy every single month. David's team looks for stocks that are poised for long-term trends and have a certain level of what he calls “unquantifiable greatness.” Tom's team looks for great companies that are in beaten-down industries with strong financial performance and excellent management teams.
Also, once per month, each team reveals the five stocks that they think are the best buys and should be purchased with new money that day.
If you’re just starting out, Stock Advisor is great because it has a continually updating and revolving list of starter stocks that the team thinks should be in every portfolio. Even if you’re coming to Stock Advisor with a lot of money and no investments, then you can get a running start through the Stock Advisor service.
Stock Advisor has been around for almost two decades, and over the last decade they’ve picked a ton of winners.
The stocks that Stock Advisor targets are great for a long term performance. They aren’t looking for something that burns bright and then crashes, they are looking for stocks that are going to perform well over the long run. They pick stocks that they think should be held at least for 5 years.
Each of the teams that contributes to Stock Advisor–team Tom and team David–have their own methods that they use to get you the best long term stocks.
Team Tom focuses on a bunch of stocks that are working in industries that are less popular than they used to be. Because the markets are not known to be popping and strong, this helps you get great stocks at a bit of a discount. Tom focuses on stocks that have great business models and excellent financials. With a great management team and great ownership, these stocks can perform really well in the long run.
Team David is a bit less rigorous with the process. David looks for companies that are situated in different kinds of trends, but that also have some kind of X-factor that can help them succeed over time. These are the intangible qualities. These are the companies that have something special about them. While you can tell that they have a strong business model and a great brand, there’s always something a little bit extra about the companies.
Team David doesn’t just work in the Stock Advisor segment.
David and a different team of analysts also work the Rule Breakers service, producing a different type of analysis.
This newsletter, Rule Breakers, seeks to identify “high-growth opportunities that are poised to be tomorrow's stock market leaders.” In other words, they target explosive growth.
The Rule Breakers team is looking to take big swings at the market and hoping to hit a few home runs, and so far their batting average is pretty good!
They are looking for a variety of innovative leaders that are taking over new industries.
If you can find the right person at the helm of a company that is well-positioned in a new industry, then you can get a huge return on the stock.
If you can find a stock that has a great advantage in a given business, then you can find a bunch of money moving forward.
Businesses that have a bunch of competitive advantages might be great for the long-run.
Rule Breakers is also looking for a ton of counterintuitive companies that keep on winning.
If companies beat the conventional wisdom of the market at one point, and have a strong system, they will probably continue to do so.
The Rule Breakers newsletter is also looking for counterintuitive, X-factor companies, just like Team David in the Stock Advisor segment.
These are companies that are positioned really well to beat the market and win by a lot.
Rule Breakers also produces a couple of specific new stock recommendations each month and curates a Best Buys list that helps you consider additional recommendations.
Rule Breakers also has a list of Starter Stocks that can help new investors begin to build a portfolio.
Head to Head Comparison
Stock Advisor started in 2002 while Rule Breakers started in 2004.
Both of the different portfolios have existed before the crash of 2008, and have survived through that same crash.
Stock Advisor has had a couple of years to increase the total performance numbers, but has also had more time to fall in the charts.
Ultimately, the two year difference between the two newsletters should not cause you to pause too much on either one.
Both of them have had a solid 10+ years to prove themselves.
We have been subscribers to both for over 5 years now and here is how they have performed for us through November 5, 2021….
Stock Advisor Performance for the last 5 years…
and Rule Breakers Performance for the last 5 years…
Both of them have strong performances, and continue to do so year after year.
So what's the difference between Stock Advisor and Rule Breakers?
- Over the last 5 years, Rule Breakers is up 331% compared to Stock Advisor 233%
- 81% of the Rule Breaker stocks were profitable compared to 84% for Stock Advisor
- 63 out of 120 Rule Breaker stocks have doubled and 57 out of 120 Stock Advisor stocks have doubled
- The Rule Breakers stocks seem to have both the biggest winner and the biggest loser each year ( this is consistent with trying to identify the biggest growth opportunities–sometimes they are really right and sometimes they are really wrong)
- Rule Breakers had 5 sell orders and Stock Advisor 5 sell orders
- They are both currently being offered for $99 a year
Stock Advisor vs Rule Breakers Conclusion
Over the 20 years since launch, Stock Advisor has the best overall returns and the greatest percentage of winners. However, the overall returns of the Rule Breakers picks for the last 5 years are beating Stock Advisor easily.
My takeaway after subscribing to both of these services overs the years is this: If you have the discipline to buy equal dollar amounts of each of their 2 stock picks each month, based on their recent performance I would recommend Rule Breakers. You will have more losers than Stock Advisors, but the winners should be really big winners.
If you DON'T have the discipline to buy all of their stock picks, then I think Stock Advisors is the better bet.
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*** UPDATE -- Monday, January 17, 2022 -- MOTLEY FOOL STOCK ADVISOR AVERAGE RETURN OF THEIR LAST 120 STOCK PICKS IS +233% ****
The year 2020 was tough in so many obvious ways, but if you were a Motley Fool subscriber you are smiling given that the average return of those 24 picks thru November 6, 2021 is +106% compared to the SP500's 50%!
Better yet, we have been tracking ALL of the Motley Fool stock picks since January 2016. That's 5 years, 60 months and over 120 stock picks. As of Friday, November 5, 2021, their 2019 picks are up 108%; their 2018 picks are up 248%, their 2017 picks are up 215%; and their 2016 picks are now up 451% for an average return of 233% over the last 5 years. 84% of their picks were profitable and 57 out to 120 have more than doubled! The Fool has done so well because they quickly identify stocks year that will perform well in the current environment. THAT is how the Fool consistently does so well--they adapt and constantly pick stocks before everyone else realizes the opportunities.
- Tesla (TSLA) picked January 2, 2020 before the crash and it is up 1,320%
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Here is their release schedule of their upcoming stock picks:
- December 2, 2021 - David's New Stock Recommendation
- December 9, 2021 - David's List of 5 Best Stocks to Buy Now List
- December 16, 2021 - Tom's New Stock Recommendation
- December 23, 2021 - Tom's List of 5 Best Stocks to Buy Now
Remember, 84% of their recommendations from 2016 to 2020 were profitable with an return of 233%. So if you have a few hundreds dollars to invest each month and plan on staying invested for at least 5 years, we haven't found any better source of stock picks. When you subscribe, you also get full access to all of their recent picks.
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Methods of Investing
Hidden gems is probably the best way of describing Rule Breakers.
David and the team are the focus of Rule Breakers, and they focus on finding all kinds of picks that help you find great stocks that aren’t that risky.
Identifying companies that have a good chance of turning a really good rate, then buying them while low, allows people to build a really good portfolio.
But instead of just googling hot companies and finding great growth rates that are untethered to great companies, the Rule Breakers team focuses on finding these things located within companies that are really strong.
If you can find a company that has a great cash flow and a great business model, and it has really strong growth, it can be a great company to own moving forward.
The Stock Advisor program is completely different than the Rule Breakers category in terms of investments and strategies.
The Stock Advisor program is the flagship Motley Fool recommendation service, which allows it to be the most generic.
They also reserve some of the best long-term bets for this recommendation service.
You get great investment advice, but it is also safe and solid.
History of Returns
The big difference between Stock Advisor and Rule Breakers is going to be performance.
While Stock Adviser is up 680% since inception in 2002, Rule Breakers is up 376% since 2004. But the last 5 years Rule Breakers has outperformed.
But there are a few things behind those numbers that you need to understand.
First, the Stock Advisor service has had a couple extra years to pick up on those numbers. Second of all, these are the aggregates of all of the individual picks. It doesn’t mean that every stock in the Stock Advisor service has performed better than every stock in the Rule Breakers service.
In fact, the opposite is true. There have been many stocks in the Rule Breakers service that have actually done really, really well.
But there are also plenty of stocks that have done really, really poorly.
As you might expect, the Rule Breakers has produced some big hits and some big duds.
So Stock Advisor has put together a much better long-term game over all of the different Rule Breaker stocks.
But if you love playing the odds and seeing how individual stocks perform, then Rule Breaker stocks give you access to a ton of different individual picks that can go the distance.
The Services, In-Depth
We've talked quite a bit about the different kinds of philosophies behind the Rule Breakers and Stock Advisor services.
But what do the individual services actually get?
The Rule Breakers members get a ton of different education articles and trading tools.
The big hits of the service are the awesome stock picks that you get every single month.
If you’re getting ready to trade or simply want something new, it’s a great service to have in your back pocket.
If you’re a member of Rule Breakers, then you’ll also get a couple of new stock picks every single month.
Each of these picks also comes with a ton of research.
You don’t simply get a paragraph of buzzwords!
You get a ton of valuable information that you can use to make the correct picks for your individual portfolio.
The Motley Fool actually picked up an audience in the first place by providing great, in-depth research to a ton of different people in the industry.
Their research is still great, and it comes in a couple of different forms.
You get a great quick summary that takes a minute to read.
If you still have more questions after that, you can dive into the full research report.
Stock Advisors may also be something to check out.
The Stock Advisors service also offers you a couple of different stock picks each month, and in-depth research for each of the stocks that you are being offered. You get the same kind of different research metrics but for a different set of stocks.
Why Not Both?
It’s important to realize that these two different advice columns are not offering contradictory opinions on the stock market!
All of the advice and research is generated by Tom and David, along with the whole Motley Fool team.
They can both offer you a variety of different perspectives on what is going on in the stock market.
If you sign up for both, Rule Breakers will give you some more volatile, high-risk and high-reward stocks that can be great for going after the market.
Advisors will give you a great way of balancing your whole portfolio without leaning too far into different kinds of stocks.
If I’m Picking Only One?
If you’re picking only one, then you are going to have a tough decision to make.
The rationale behind the two different services are completely different.
Rule Breakers is for the risk takers who want to get in-depth scouting on stocks that could be huge.
Stock Advisor allows people to dig into a great selection of stocks all over the place.
It has a history of producing big returns as a whole, and is the much better choice if you are going to simply follow the picks without thinking too much about the research.
But if you like rolling the dice on some stocks–then having Rule Breakers makes a lot more sense.
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