Motley fool podcast mis advice

bigadaj

I'm a bit behind on these but just listened to the one from a couple of weeks ago about buying your first share.

I was a bit shocked by the advice, after explanation of some simple investment terms they seemed to recommend just diving in.

No mention of building up a sum in funds for safety and diversification, Just an odd comment that you're unlikely to lose all your money in one share, and then suggestions for looking at unilever and shell.

markwilkinson

Probably bad advice.

I've made tons of stupid errors in the past with regard to investments (amongst others lol). Got scared with an investment trust that kept eating my payments and bailed without having a thought that I should stick with it for the longer term.

Lost money on my first couple of direct share holdings because I went with my heart and not with my head.

Lost out on 'windfalls' a a couple of times chasing profits in shares that never materialised.

Thankfully I was young enough to earn the money back and it taught me a lot.

There's a lot to be said for just "jumping in" you will learn a lesson!

A_Flock_Of_Sheep

Motley Fool.

More like village idiot

Ark_Welder

What should be remembered about Motley Fool is that they are not offering unbiased opinion, they are selling a product, which is their share dealing service.

blinko

there is no rule that says you have to diversify your investments. Mine are not very diversified at all. BUT I do know my investments pretty well.

I would recommend getting to know your investments intimately it makes investing so much easier

IronWolf

I used to read the Motley fool but after a while its just the same stuff repeated over and over. The articles lack depth and insight on the whole.

At some point you do need to just jump in and buy your first stock, it will probably not do really well but the important thing is dont put a meaningful amount of money in at first. Start small and add more as you get more experienced.

A_Flock_Of_Sheep

I used to look up share tips and Mötley Fool articles and their free guides. I don't bother now. It's more fun making your own decisions.

Then if it all goes wrong you can only blame yourself.

bowlhead99

Excuse the long post (as usual)...

Mis-advice, bad advice? I think this is a harsh assessment of the podcast unless you were hearing a different one from me.

It is not an advice service as they can't know your goals or aspirations, risk appetite or knowledge level - and if you had 20 minutes of caveats the show would be over before you got to the content.

It is a general all-purpose investing site pitched at people who are not investment professionals but who are interested in investing. They know their target audience and have been churning out entry level and slightly more advanced articles for years but it is not bleeding-edge original research.

The articles and more recently the podcasts will tend to have a mix between commentary on markets or individual stocks, and some general investing concepts - with more depth than you get on MSE which is primarily saving money and getting value from other financial products with the occasional investment comment ; Fool is primarily investment with the occasional saving or other financial products.

They typically cover investing in stocks rather than funds, which to some will be more interesting and exciting; frankly I like hearing about what companies are doing with my money rather than what fund managers are bullish about. If you want self-promotional articles about fund of the month instead of share of the month, you can go to trustnet or the like.

For people who are comfortable with investments generally or are just 'having a dabble', they can dive into the individual share or sector-specific forums where some of the users are very insightful (of course, some are idiots) and have some frank discussions on shares or strategies which will go way beyond what you can get in a teaser article that draws people into the site.

One would imagine that on a site like that there must be visitors who are saying "hmm, I can see there is lots of editorial and tens of thousands of posts about individual companies and how they are weathering the markets. I am interested in being an owner of one of these businesses but to be honest I have never actually bought a share on a 'stock market'. Can someone please explain to me how someone actually does that."

So in response to the question from their user (who knows if he exists or not or it's just an idea they wanted to do an article on) they create a podcast where three pleasant sounding people talk you through the process of actually buying a share, in understandable terms.

There was no blatant pimping of their own share dealing service and they referred to the first step being to do your research as which of the many brokerages you might like to use as there were different types of cost and different levels of user friendliness.

Not a single brand was mentioned and they said you ought to look at - trading fees ; dividend reinvestment schemes ; ISA admin fees ; inactivity fees ; exit fees. They did suggest looking for a well known brand, not necessarily the biggest which might be expensive without your interests at heart but also not the absolute bare minimum bargain basement where you might be less certain that the broker would still be in business a couple of years down the line.

Can't argue with the logic, though they mentioned the typical going rate for trades being £10-12 which is in line with their own pricing, cuts out the expensive banks and wealth managers and the £6 guys (x-o.co.uk not mentioned by name but they mentioned that fee level being available but perhaps not sustainable, was a bit of a dig at their competition). Of course, as Ark Welder infers, if you are reading or listening to content for free it is because they are making money somewhere (if you don't pay for the product, you are the product). So yes they have an agenda to stir up interest in share buying.

Generally the comments were all sensible. When talking fees they recommended not investing too small amounts so that transaction costs weren't a crazy percentage of your investment unless it was expected to be a super-long buy and hold.

One suggested that when she first had an interest in shares and a lump sum available, her boss recommended she split it and invest smaller amounts over several quarters in different companies, avoiding initial temptation and an overenthusiastic rush to invest all at once in this new exciting world. Good point to bear in mind.

Also mentioned was making sure as part of your trade that you actually bought what you had intended, sense check the price etc which one of them 'fessed up to having done wrong in the past.

Aside from the actual mechanics of placing a trade and whether to deal certificated or not, they briefly touched on the type of company you might be doing your trades in, which should be one you understand how they make their money. They gave an example of buying a Unilever share, which is a popular liquid holding, pays a dividend, probably not going to disappear overnight, and is a high street brand that people will have on their shelves - it helps people grow a passion for investing, if they can see products out there in their daily lives and participate in the results.

They then said, say if you had just bought a Unilever share, should you then buy one of Unilever's rivals as your second holding. Answer was no, if they are struggling from sectoral issues then makes more sense to look at a different sector entirely, e.g. Shell is diversified from drilling to refining and petrol forecourts and if oil prices are up because of energy demand shell will gain to offset Unilever's production and distribution costs rising. Diversification is useful. They made it clear that they did not know whether those specific companies' prices would grow, only that they did not expect them to imminently collapse. Caveat emptor.

One admitted to his previous naivety in buying speculative high growth shares in which he sometimes took a 100% loss, and has not repeated the mistake for a while touch wood. Higher potential reward but higher risk. Said you probably should not be buying shares in individual small oilers and miners if these are your first ever trades. Again good point to bear in mind, sensibly explained without forcing questions of risk tolerance down your throat.

All of this seems sound advice. But it is not 'advice'. They are answering the question posed by the title of the podcast - "How to buy your first share", with some useful titbits on the side.

They had also suggested that this is for the long term, you do not want to have to be forced to sell your shares to pay for an urgent boiler repair (or some similar analogy) and suggested 6 months net salary in cash before you moved into the world of investing rather than saving. Again, good advice which they didn't have to give. They set out to give a few minutes of the buying mechanics broken down into 5 stages, some of which had sub stages like what things do you look for in broker pricing. With some padding around related concepts.

I use both funds and shares, but some people here have huge share-only portfolios with a goal of keeping down their annual fees and the occasional IT for overseas exposure. The Motley Fool's High Yield Portfolio section is well known in the casual investor community. They said hold cash first before looking at investments. But there is only so much you can say to put people off. Their editorial content generates interest in buying shares. If someone says OK then how do I buy a share, should the first ten minutes be, "What you should do, is not buy a share at all, until you have first bought a basket of shares through Funds. Here's what to look for in considering Fund platforms and how they all work"? That would be a bait and switch article headline which I hate.

Did people really expect "How to buy your first share" to be "here are all the concepts you ever need to consider when wondering about investment in general and whether or not to buy shares over a house to live in, or investments in other asset classes"? The podcast intro above the clickable link says "The Motley Fool crew go back to basics this week to explain how to buy your first share. Where do you do it? How do you do it? What does it cost?". The podcast did what it says on the tin AND gave other useful points for good measure.

Ironwolf's assessment of Fool as a website is quite right that "after a while its just the same stuff repeated over and over with the articles, on the whole, lacking depth and insight." Once you have set up a website doing what they do for twenty years (16+ on the UK version) it must be incredibly tricky to package up the same investing principles - which have not fundamentally changed for XX years - into different articles to keep people hitting up the front page.

If there are new popular products or rule changes or interest rate changes or tax changes, or privatisations, they might get a mention. But they have been talking about investments for literally two decades. A google search for a particular issue might find an article they wrote 5++ years ago which still makes sense. To keep the site fresh they can lift the ideas and combine with other old ideas perhaps with a nod to current markets, and write a new popular article which is just a rehash of what we remember reading 10 years ago. But millions didn't even have broadband internet 10 years ago so you can see why they would do it.

As there is little new 'fundamental' stuff coming through, their 'editors picks' on their front page are generally share specific. Because they can't come up with new content with groundbreaking insights into investment principles and products even if they wanted to, as new investment principles and product structures do not come into existence on a weekly or even monthly basis. With 20 years of articles already posted, the new ones are inevitably focused on particular stocks or market news:

NEW! 5 Shares To Retire On
VIDEO: 2 Stocks Making The News
5 Reasons To Buy Royal Mail
ASOS Gains 10% After Beating Expectations
3 FTSE 100 Shares Paying 5%+ Dividends
How I Rate Imperial Tobacco Group PLC As A 'Buy And Forget' Share

Any editorial has to consider a target audience. They could write a more in-depth article aimed at investment professionals, but only of interest to a fraction of a percent of the population. They could get into more detail on individual shares but their role is not to be a house broker it is to help put together some of their writers opinions with comments from other brokers and the gist of company announcements to make something interesting to read which might be useful in doing your own research to make decisions. This doesn't mean it has no value whatsoever, it is effectively just a jumping off point.

For some it will still go over their heads and for others, not scratch the surface. Those people who want more will take it to the forums. Fool at least seem to try to be responsible in some areas rather than just completely whoring their products or those of affiliates - they kicked off a 'how to' series a few years back with "While we're a fan of stock markets, here are some reasons you shouldn't invest in shares...". It comes down to what you expect from a 'money' blog site - there are tens of thousands out there, available in all flavours from individual shares to index funds to cash savings. But overall I didn't think this podcast particularly bad as an intro to share dealing for someone who wanted an intro to share dealing.

- - -
Finally on the comment that after long enough time, we start seeing the same points over and over. Something to which I alluded in another thread, I fear I'm running out of 'original content' myself for high level answers to questions or issues coming up on this board.

Investment principles, common sense and personal opinions rarely change. For most threads you could give sensible answers by cut-n-pasting from previous answers with the occasional tweak, which is not very stimulating. And with a thriving community here, there will always be someone around to give the quick and easy answers or debate them if they're not obvious.

The reason my posts have been getting longer and longer is to try to give that extra level of insight beyond the low-hanging fruit that anyone can knock off in one minute flat. I can't say it's a thankless task - as I've been thanked in > 2/3rds of the things I posted) - but as you can imagine if you try and post a reply which pre-empts the reply to your reply, it can eat a lot of your time. I've now realised I no longer really have the time to do this and wouldn't feel I were adding much or enjoying myself if I just gave one line throwaway responses.

So, I decided to give up being an active MSE poster once I hit an arbitrary 750 posts, which I just did. I'm sure I'll drop in and read stuff or ask about stuff if I'm curious - but basically I'm taking time out from posting, indefinitely. Just thought I would mention it, in case you thought I had died or something. Good luck on your investing journeys.
:beer:

Doshwaster

I used to be a big fan of the Motley Fool site 10 years ago and I learnt a lot from it when I was first getting into investing as an financial education resource and discussion forum. However, over the years it became more and more commercialised so I switched to MSE as my main financial site.

lisyloo

I would have thoought it would be good advice to practice with a vritual portfolio first and learn all your lessons for free.

gadgetmind

Make your first million using collective investments and only then look towards individual equities.