When it comes to something as important as investment decisions and choosing where to put hard earned money, it’s a really great feeling to know that there are no bad choices. That’s definitely not the case when it comes to all investment advice out there these days, but someone comparing the Motley Fool vs Morningstar can feel reasonably assured they will be in good hands no matter their choice. A good starting point is to review what else has been written comparing them.
That said, there are certainly differences between the two services and an understanding of those differences is important in helping an investor decide which is best for them. Before delving into the two offerings and assessing the best fit for your investment style, it’s smart to step back and take a look at the origins of both.
A Long History
The Motley Fool was founded in 1993 and has been offering stock picks through its Stock Advisor service since 2002. It has been discussed at length online. While its advice is dead serious, it does take a more relaxed or casual approach to what can be a heavy and complex topic, sprinkling humor and light-heartedness throughout its writing. Morningstar is just the opposite; a traditional financial analysis service founded in Chicago in 1984, it offers investment advice in the type of language and tone your grandfather would recognize.
Not Fooling Around
With that background serving as context, it is now worth taking a closer look at how the offerings differ when comparing the Motley Fool vs Morningstar. The Motley Fool on a basic level is a stock picking service. It sends readers and subscribers about 12 picks per year, with the exact picks varying by whether the user is subscribed to its more traditional and conservative service Stock Advisor, or the higher risk, higher reward Rule Breakers offering.
Regardless of whether you subscribe to Stock Advisor or Rule Breakers, the basic tenets are the same: you are given a bunch of stock suggestions (about 12 per year), and you can execute them or research further at your own discretion. Many of the risks and benefits of picking individual stocks apply here. Depending on luck and skill, you can opt for mostly winners and enjoy outsized gains, or have the misfortune of buying more losers and suffering the losses.
Buying all of their picks is a good way to hedge against that risk and give yourself a good chance of some growth, but not everyone has the cash to buy 12 individual stocks a year. If you opt to pick a smaller group of individual stocks among their 12, you need another commodity in short supply for many people: time. More specifically, you need the time required to do additional research and decide which of the 12 recommendations you are most comfortable with.
Morningstar Rising
Morningstar is a tool designed to eliminate the sometimes harrowing experience of picking individual stocks. It offers recommendations for mutual funds and Exchange Traded Funds (ETF). Both are lower volatility investment vehicles that offer investors the chance to have broad exposure to the stock market. Mutual funds are a collection of individual stocks with a specific investment goal in mind, and actively monitored by a fund manager, while ETFs are a more passive tool designed to mirror a specific segment of the stock market, such as the S&P 500. Both are excellent tools for investors who want to own a broad swath of the pie without the responsibility of picking which individual pieces to buy. Morningstar ranks funds on a 1-5 scale based on their own in-house, top-secret formula.
Both the Motley Fool and Morningstar have provided their users with solid returns, though one criticism of Morningstar is that all of its ratings are based on historical data and do not allow for more subjective, forward-looking predictions.
It would be unfair to compare the two without talking about price, and this is another area where they are fairly similar. The Motley Fool’s most popular offering, Stock Advisor, costs $199/year but offers new users the introductory rate of $99/year, with the even steeper discount of $79/year available here. Morningstar Premium costs $199/year but it comes with a free 14-day trial before you’re committed for the year and there is an introductory rate available here.
Which is Right for You?
There’s good news when trying to answer the question of Motley Fool vs Morningstar – it is hard to be wrong. Both are solid investment advice services with a history of good returns. It’s more a matter of personal preference. Those looking for broad exposure to the stock market and a more passive investment style should consider Morningstar, and investors with the appetite to take on a little more risk and buy stocks individually should do well with the Motley Fool.
