A Foolish Guide to Using Multiple Services

Our mission is to help you build your best Foolish portfolio. We offer plenty of services to assist you, but your success starts with three simple ingredients:

  1. Understanding your personal circumstance and goals
  2. Embracing smart investing principles
  3. Building a customised and diversified game plan

The first factor is something only you know. And, as a company that only provides general (and not personal) advice, we need to leave to you. Are you looking to crush the market? Seeking income? Maybe even a mix of both? Are you investing to retire in 20 years, or are you looking to enjoy the retirement you’re already in? There are no perfect answers … only answers that are right or wrong for you.

The beauty of Foolish investing is its simplicity:

  • Buy pieces of businesses (not just ticker codes on a screen) with the aim of holding them for the long term.
  • Own shares in at least 25 companies across a range of industries, geographies and even currencies.
  • Don’t spread yourself too thin. If you own 150 stocks, especially if they’re all tiny positions, then even a 10-bagger isn’t going to move the needle very much.
  • Add to your winners, but know your limits. Is a 10% position too high? 15%? For most investors, it shouldn’t go higher than that.
  • Remember that a minority of your stocks will probably drive the majority of your gains; so…
  • Aim to make money most of the time, but understand that not every investment works out and not every day, month, or year is profitable.

Once you understand your goals and embrace capital-F Foolish investing principles — which, if you’re reading this, you’ve hopefully already begun — you’re ready to build your customised game plan.

I have one or two Motley Fool services already… Why would I join another?

If you’re already a member of Share Advisor, Dividend Investor or Extreme Opportunities, thank you! We appreciate your business, and more importantly, we appreciate your trust. We’ll continue to do our best to serve you.

In our experience, though, some members want more. Perhaps they want guidance on how to turn our recommendations into a balanced, coherent portfolio. Other times, they want to know which trends we see, and think members can capitalise on. Or, they’re just in a different stage of life, and want to tailor their investing to their circumstances.

That’s why we have more than one type of investment service. Rather than bundling it all up and selling it for a single (but great value!) price, we offer different services so that you can choose which ones are right for you.

Our entry-level services offer one recommendation every month, plus a regular ‘Best Buys Now’ feature. Share Advisor, our flagship service, aims to bring you the best mid- and large-cap growth companies (and the occasional value play) we can find. Dividend Investor is for investors looking to add quality dividend-paying companies to their portfolios. And Extreme Opportunities fishes in the higher-risk, higher-return end of the market, aiming to take on more risk (and have a few more losers) in the quest for the big winners of tomorrow.

On top of that, we have services that aim to provide ongoing portfolio advice — when to buy, how much to buy, when to trim, and when to sell out altogether. And they cover the waterfront: the Ultimate Growth portfolio is looking is to build a concentrated portfolio of the best emerging growth companies on the ASX, the Ultimate Innovation portfolio aims to outperform our benchmark (the ASX All Ordinaries Index) over 3 year and 5 year rolling periods by building a concentrated portfolio of the best innovative companies on the ASX, Microcaps is looking to bring members some exciting higher-growth companies at an earlier stage of the investing lifecycle and Everlasting Income aims to provide regular, never-ending income from a portfolio of quality, dividend-paying companies.

These are just some of our products. So, depending on what you’re looking for, we almost certainly have the services you can mix and match to suit your investing circumstances, goals and risk tolerance, in a way that’s right for you.

How to Choose Your Own Path

There are multiple ways to mix and match The Motley Fool’s services but only you can determine what is the best combination and strategy to meet your investing goals. As you consider each of our products we have principles that may assist in your decision making.

Please note that we provide general advice, which means we can give share recommendations and other advice to our members as a whole, but with the explicit understanding that they should decide if the advice is right for their personal circumstances.

Our recommendations may not be enough to put together a rounded investment portfolio, particularly if you’re risk averse, or want a spread of investments

While we believe that listed companies (i.e. shares) should be central to one’s portfolio, you might want to have exposure to other types of assets (maybe term deposits or government bonds), plus an emergency fund, ideally in a high-interest online savings account. Our general rule of thumb is that people should not be investing money in the stock market that they anticipate needing within the next three years.

We think it’s important to note that The Motley Fool products are generally designed to target growth stocks . While do have services – like Dividend Investor and Everlasting Income – designed to target reduced volatility and income investments, the vast majority of our services target growth. That means they’ll probably be more volatile than the average bear. We believe it’s important to take advantage of a variety of resources to develop a well-diversified portfolio.

We don’t think money invested behind any individual trend/theme/industry should make up more than 10% of any investor’s portfolio.

It’s important to be diversified across a variety of trends/themes/industries to ensure that you balance exposure to fantastic opportunities with the risks that come from being over-allocated to a single trend. In general, we advise members of our trend-based services to invest up to 10% of their stock portfolio in that trend.

We also don’t think money invested in higher-risk growth stocks should represent more than 30% of an investor’s portfolio.

Just as it’s important to diversify across trends, it’s important to diversify across other factors, including the general risk profile of your investments. In general, we advise members of our high-growth services  to invest up to  30% of their portfolio in that service.For those in or near retirement, a lower percentage is probably appropriate.

More diversified Foolish growth services could generally make up a larger percentage of someone’s portfolio.

Popular trends and high-growth stocks are often exciting because they capitalise on new ideas, new opportunities and new technologies. But they can sometimes perform in lockstep, so we believe it’s important to pair trends and extreme growth with more balanced foundational growth. These services can often comprise 20% to 50% of an investor’s total stock portfolio.

How to Approach Multi-service Recommendations

One key question from a lot of members is how much of a company’s shares to buy if it’s recommended across multiple services.

First of all, when you see a recommendation of a company you already own, that’s usually good news, not bad! Many of The Motley Fool’s best performing recommendations have been selected in multiple services, and great support tends to showcase higher conviction.

Second, even though we can’t provide personalised financial advice, our general recommendation is to buy more. Here’s how:

First, work out what % of your portfolio you’re devoting to each of our services. It might be 40% Share Advisor, 40% Ultimate Growth and 20% Microcaps, for example.

Then, invest that percentage according to each service’s recommendation.

(The primary caveat is to not buy more if you already own an outsized position  — determined by you — but that should be a rare occurrence.)

Here’s a hypothetical example: Let’s say a member is investing $100,000 across the services in our example above, and has decided to invest 40%, 40% and 20% accordingly.

Their Ultimate Growth portfolio would be $40,000 (40% of $100,000)

If Ultimate Growth recommends putting 7.5% of your Ultimate Growth portfolio into Jester’s Japes (ASX: HAHA), then the member would invest $3,000 (7.5% of $40,000) in that company’s shares.

If the company was then recommended in Microcaps with a 5% allocation, the member would then invest $1,000 (5% of 20% of their $100,000) to buy more of the company’s shares.

Note that even though they’re buying more shares of Jester’s Japes, they still only have $4,000 worth of shares (4% of their $100,000 portfolio), so buying more doesn’t (necessarily) lead to an overallocation to a single company.

Of course, each member can do whatever they want, based on their preferences and circumstances, but that’s how we’d suggest going about following our advice.

Foolish Bottom Line

There are many ways to build a Foolish portfolio, and hopefully we’ve been able to show you how you could use our different services to do it for yourself.