Motley Fool Rule Breakers Review (2020)

Do you want to invest in stocks with high growth potential?

Motley Fool Rule Breakers might be the investing newsletter you’re looking for. You get monthly stock picks of growing businesses that might be tomorrow’s Apple, Microsoft, or Amazon. Each recommendation can become “the next Amazon or Apple.” Don’t worry, you won’t be investing in penny stocks, options, or warrants.

Rule Breakers can be a good option when you already have an established stock portfolio and are an aggressive investor.

While the potential reward is higher, these Motley Fool stocks to buy tend to be riskier than a “FAANG” stock or a blue-chip dividend stalwart like Proctor and Gamble or 3M.

Motley Fool Rule Breakers Review (At a Glance)

Note: An in-depth Rule Breakers review is follows this quick glance.

Here is a quick birds-eye view of what you get with a Motley Fool subscription to Rule Breakers:

  • Two monthly stock picks
  • “Best Stocks to Buy Now” updates weekly at 1 p.m. every Thursday
  • In-depth analysis of the full Rule Breakers portfolio
  • Special reports when stock picks rise or fall at least 10% on a trading day

A Rule Breakers subscription costs $99 for the first year after a 30-day risk-free trial.

You may wish to avoid Rule Breakers if you want to earn fixed income or want the relative stability of dividend stocks.

Rule Breakers Historical Performance

As of June 22, 2020, the Rule Breakers portfolio is outperforming the S&P by 140.6% since launching in 2004. (Motley Fool claims the lifetime Rule Breakers performance is 217.8% and 77.2% for the S&P 500 over the same period).

If you think that’s impressive, the less-aggressive Stock Advisor service has outperformed the S&P by 345.7% (437.6% vs. 91.9%) since its 2002 inception.

In a world where passive index funds and target-date retirement funds are two popular investment options, the Motley Fool portfolio monthly stock picks are a legit way to successfully invest in individual stocks.

Still interested in this somewhat different stock investing newsletter? If so, keep reading.

What Is Motley Fool Rule Breakers?

Long-time investors are familiar with The Motley Fool. They’ve been providing investment advice since the 1990s through printed books and online content including written articles and investing podcasts.

New investors may think the name Motley Fool is a scam. To make a long story store, Fool founders David and Tom Gardner derive the name from Shakespeare’s As You Like It

I invest my own money in some of the Motley Fool Rule Breakers picks. Like anything, some investments perform better than others. You will have the most success by investing cash and hold for several years–not swing trading.

You don’t have to be a high net worth accredited investor (i.e., earn more than $100,000 a year) to buy the Rule Breaker portfolio.

The monthly stock picks are not penny stocks or volatile commodity stocks. You’re essentially investing in small-cap and mid-cap stocks. Two recent monthly stock picks include Livongo Health (Nasdaq: LVGO) and DocuSign (Nasdaq: DOCU). These two stock picks give you an idea of what stocks you might invest in with this Motley Fool subscription.

Rule Breakers Investing Strategy

You can watch the above video to get a better feel for the Rule Breaker investing strategy.

6 Signs of a Rule Breaker

When picking stocks, Rule Breakers adheres to these six rules to help pick winning stocks:

1. Top dog and first mover in an important, emerging industry

2. Sustainable advantage gained through business momentum, patent protection, visionary leadership, or inept competitors

3. Strong past price appreciation

4. Good management and smart backing

5. Strong consumer appeal

6. Proof that it is overvalued according to the financial media

Risk Rating

Motley Fool assigns a 25-point risk rating to each stock pick. The higher the rating (i.e. closer to 25), the riskier the stock. Of course, that means potentially higher returns than investing in lower-risk stocks (i.e. closer to 1).

Some Rule Breakers stock picks have risk ratings as high as 20 and as low as 5 or 6. Most likely, no Motley Fool pick is going to be below 5 (there isn’t a risk-free investment–including FDIC-insured bank accounts).

Expect a fair number of these picks to have wide price swings. These stocks aren’t household names yet so they have periods of strong growth and correction. Like Stock Advisor, Rule Breakers plans on holding each pick for at least three years as they predict these stocks will outperform the S&P 500 long-term.

My Experience with Rule Breakers Stock Picks

In my experience, Rule Breakers tends to invest in these types of growth stocks:

  • Foreign-based companies (most likely Asia)
  • Recent-IPOs of lesser-known companies
  • Companies in emerging industries like artificial intelligence, biomedical, or cloud computing

All stock picks trade on the major U.S. stock exchanges. It’s possible for any American investor to buy these stocks from their current brokerage. Or, from a high-quality free brokerage like M1 Finance.

While not every stock pick is a winner, Rule Breakers has been right more times than not. Some of their picks are still active from 2004, like Intuitive Surgical (Nasdaq: ISRG).

Join Rule Breakers for just $99 per year!

Motley Fool Stock Picks

There are several premium Motley Fool investing newsletters. Two of the most popular (and most affordable) are Stock Advisor. Rule Breakers is by far the more aggressive of the two. They try to invest in smaller companies or those where the growth potential is greater than the volatility.

Below is an example of what I mean about when Rule Breakers recommends a stock compared to Stock Advisor.

Motley Fool Rule Breakers Stock Pick

Click to expand Credit: Charles Schwab research tools customized by Money Buffalo

As you can see, Rule Breakers subscribers were recommended ANET with a $73.74 share price. Stock Advisor readers may have first heard about this stock three years later with a $176.74 share price. Buying and holding ANET from the two recommendation dates would turn a $1,000 investment into $2,297.62.

Obviously, not every Fool stock pick will have this stellar performance, but you get the idea of what to expect.

Two Monthly Stock Picks

You receive new stock picks every second and fourth Thursday at 1 pm Eastern.

In most cases, the twice-monthly stock pick is for a new stock not already in the Rule Breakers portfolio. Sometimes, they re-recommend open positions that still have more growth potential ahead. After all, the best move can be buying more of the great companies you already hold.

Each stock pick includes a brief writeup telling you why the stock is a good buy. A smaller section touches on the potential risks and when you might sell. Like any newsletter, Rule Breakers is very optimistic about their newest picks, so (once again) perform your due diligence before buying a recommendation.

Rule Breaker stock picks can be more volatile than what you already hold. You might try buying small positions and scaling up to diversify your portfolio as much as possible. Plus, you may have the best chance of outperforming the S&P 500 long term. Assuming that’s the benchmark you want to beat.

As always, do your own research for the stocks Rule Breakers recommends. For instance, you may decide not to invest in Chinese companies or love-hate ones like Tesla because you like or understand that niche.

10% Promise

When a Fool recommendation’s share price moves up or down 10% in a trading day, you can expect a brief 10% writeup. This article usually digs into the cause. Use these articles to determine if your investing thesis is still intact.

You must “follow” a stock in the Rule Breakers dashboard to receive the 10% Promise summaries.

Sell Alerts

When Rule Breakers no longer believes a stock pick can outperform the broad market, they will issue a sell alert.

Usually, this comes as an option of last resort. There aren’t any trailing stops, so if you want to sell before Rule Breakers does, you can. You might consider this when the share price drops more than usual and doesn’t seem to increase.

I subscribe to several investing newsletters and the Fool’s “buy and hold” approach has the longest investment horizon. It can be challenging to not “buy and fold” when an investment is down 30% and you don’t know when it will rebound.

Due to the recent February 2020 stock market recession, the Fool is issuing more sell alerts than in 2019 or 2018. Their conviction level is changing on older stock picks as the world economy adapts to a post-coronavirus environment.

To avoid panic selling, I recommend looking at the Rule Breakers starter stocks and buying some of them first. Some of these companies may not have the most exciting argument to buy, but they are a starter stock because they are more likely to provide a healthy balance of long-term growth and stability.

What Does Rule Breakers Offer?

Motley Fool Rule Breakers Review

A peek at the Rule Breakers dashboard. This list updates weekly.

With active recommendations hailing back to 2004, it can sometimes be difficult choosing which stocks to buy first. Rule Breakers breaks down their best current picks into two sections: Starter Stocks and Best Buy Now

Rule Breakers Starter Stocks

With more than 130 companies with active recommendations, some stocks are going to be better plays than others. I recommend looking at their Starter Stocks. The Fool believes these nine starter stocks are some of the best in the Rule Breakers portfolio for producing consistent long-term performance.

Rule Breakers updates this list as needed and it currently contains nine stocks. Motley Fool suggests buying at least three starter stocks with a portfolio of at least 15 stocks. These stocks can still be volatile, but they can be more established than recent IPOs. Chances are, you’ve heard of at least a few of these starter stocks. Two I”ll share are Intuitive Surgical and Shopify.

As you don’t know which pick is going to be the best winning idea, try buying several stocks in different industries. Most investing apps now offer fractional investing with no trade fees so it can be easier to buy small amounts of stock at once. That’s what I do, so I can buy individual stock and continue buying index funds and alternative assets at the same time.

Rule Breakers Best Buys Now

In addition to the Starter Stocks, Rule Breakers updates the “Best Buys Now” each Thursday. According to Motley Fool, these are stock picks trading at the best current share price in relation to their potential value and their competitors.

Some of these stocks overlap with the Starter Stocks. If you like these stocks, being a best buy now can be the reassurance you need to buy select starter positions first.

Motley Fool Portfolio

Clicking the “Performance” button on the Rule Breakers dashboard lets you see the lifetime Rule Breakers portfolio. This lets you see all the open stock picks. You will see some names you know like TripAdvisor, Wayfair, Tesla.

But, unless you leave overseas or work in the high tech sector, there are lots of names you won’t recognize at first glance including MongoDB, Baozun, or Bilibili.

Each recommendation shows these factors:

  • Company and ticker: The company name and ticker name (to easily find the right symbol on your broker)
  • Recommendation date: The date of Motley Fool recommends a stock
  • Risk level: Indicates potential volatility if you decide to buy a stock pick
  • Current price: Current market price if you decide to buy today (or want to track long-time performance)
  • Adjusted recommendation price: Price of stock on the recommended day (includes dividends and splits)
  • Return: Compares return for the stock pick and S&P 500 since the recommendation date
Motley Fool Rule Breakers

It’s easy to compare the Rule Breakers stock picks to the S&P 500 performance for the same time.
Credit: Motley Fool

Bonus Reports

Most investment newsletters publish bonus reports at least once a year. Usually, these are teaser reports to attract new subscribers. Paid subscribers can view the reports for free. Some past bonus reports include:

What I Like About Rule Breakers

  • A low-cost way to learn about lesser-known growth stocks
  • More aggressive than most newsletters with a smaller subscription fee
  • Long-term winning track record
  • Starter Stocks and Best Buys Now makes it easier to pick winning investments

What I Dislike About Rule Breakers

  • Above-average volatility can be too much for most investors
  • Need several thousand dollars of cash to buy enough stock picks to absorb the extra risk
  • Only a good option once you have a diversified portfolio and want to “speculate” with high-risk growth stocks

Who Should Join Rule Breakers?

  • Aggressive investors with a high risk tolerance
  • Investors who don’t want to invest in “penny stocks”
  • Investors searching for tomorrow’s potential leaders

Motley Fool Rule Breakers vs Stock Advisor

The two Motley Fool services you should consider first are Motley Fool Stock Advisor and Motley Fool Rule Breakers. Admittedly, Rule Breakers isn’t for every investor. Yes…I’m telling you to potentially not get a subscription to Rule Breakers in this Motley Fool review.

Rule Breakers is best when…you want to invest in stocks with above-average volatility but more growth potential.

Stock Advisor is best when…you want to invest in stocks that can outperform the S&P 500 but less likely to have day-to-day 5%+ share price drops or share price increases.

I subscribe to both Stock Advisor and Rule Breakers. And, I find personally myself using Stock Advisor more often. The Stock Advisor stock picks tend to be less volatile which aligns closer to my investing style and portfolio allocation.

You can read my Stock Advisor review to find out why.

Both services recommend different stocks, so there’s very little overlap. In theory, you can subscribe to both and invest in four new stocks each month.

If you only want to choose one platform, here’s a quick comparison below.

Cost

Rule Breakers costs $99 for the first year then $199 after that. Although you will most likely be able to renew at $150 with their current promotions.

At my renewal, they emailed a special link that takes $50 off the renewal price. The email comes 30 days before your renewal date. Other subscribers report a similar discount. It’s possible to renew for $249 instead with the discount.

Joining Rule Breakers on the Motley Fool website costs $299. Use this special link to pay $99 for Rule Breakers.

Rule Breakers vs Stock Advisor

The two cheapest Motley Fool premium products are Rule Breakers and Stock Advisor. I personally think these are the only two Fool products you should consider purchasing. The cost is reasonable and you will have more stock recommendations than you can or will invest in.

Stock Advisor is Better…

Go with Stock Advisor if you want lower-risk stock picks. Each month, you get a lower-risk and higher-risk pick. Although the higher risk pick isn’t always as volatile as Rule Breakers, it’s not far from it. The low-risk pick is more of a value play with less potential growth but also less volatility.

You’re also going to invest in more well-known companies including PayPal, Mastercard, and Markel.

This is also a better option if you don’t have as much cash to invest on a regular basis. The recurring subscription fee is $199–$100 less than Rule Breakers.

Related Article: Read my Motley Fool Stock Advisor review to learn more about this less-aggressive premium investing newsletter

Motley Fool Rule Breakers Stock Pick

Credit: Charles Schwab research tools customized by Money Buffalo

Rule Breakers is Better…

Go with Rule Breakers if you have a long investing horizon or are comfortable with more volatility. As long as you do your due diligence before investing, you can be a successful investor. But, expect a few more losers than with Stock Advisor.

But, during times of healthy markets, you might get better returns. Even if you only use Rule Breakers for a small part of your portfolio and primarily rely on Stock Advisor, Rule Breakers can be a good add-on.

Motley Fool Rule Breakers Discount

I’ll be the first to say that Motley Fool Rule Breakers subscription discounts don’t happen often. One discount you can automatically qualify for is getting Rule Breakers for $99 a year (normally $299 per year if you subscribe directly from the Motley Fool website)).

Motley Fool Stock Advisor is also available for $99 a year (usually $199 per year if subscribing directly from Fool).

Both discounts come with a 30-day trial period. If Motley Fool isn’t worth it, you can cancel during the first 30 days for a full refund.

When it’s time to renew your Motley Fool subscription, you will pay the current price at your renewal period. In my experience, Motley Fool sends an early renewal offer that reduces the renewal price by $50. I also got a multi-year subscription to Rule Breakers for the price of one year in an email offer once.

My suggestion is to check your Motley Fool emails to see periodic offers. Buy the discount when you have the chance as you don’t know when a Stock Advisor discount or Rule Breakers discount may come again.

Paying less for a service means you have more money to invest. Using a micro-investing app lets you quickly buy multiple recommendations and only invest a small amount of money. And, a lower subscription costs makes it easier to recoup your investment costs with potential gains.

Is Motley Fool Rule Breakers the Best Investing Newsletter?

I don’t know your individual investing goals or financial situation, so I must provide a rather generic answer to this question. In my opinion, Motley Fool Rule Breakers is one of the best investing newsletters.

Rule Breakers is one of the most affordable ways to find out about lesser-known companies with above-average growth potential. These stocks tend to be technology-related. New innovations improve productivity, reduce costs, and reshape our lifestyles–progess is good, right?

Usually, newsletters that invest in cutting-edge stocks cost $1,000 (or more) each year or only for accredited investors who can access private placements or afford risky investments. Most investing apps let you buy any Rule Breakers recommendation.

However, Rule Breakers isn’t the best investing newsletter if you prefer dividend stocks, buying established companies that everyone already knows about (i.e., 3M, Mcdonald’s, Nike, Proctor and Gamble). These stocks have already experienced their explosive growth phase, in most cases. They are less volatile and can earn passive income, but you miss out on exposure to stocks that few people own today but might be a portfolio staple in the next decade.

Summary

With 16 years of beating the S&P 500 long-term, Rule Breakers is a successful way to buy smaller individual stocks and profit. The low subscription fee means you have more money to invest in your twice-monthly picks. Although you will need to invest regularly to capture the best potential returns, this is a legit investing newsletter if you can stomach the additional risk that other newsletters try to avoid.

Are you going to try Rule Breakers? Leave a comment and let us know what you decide.

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