Motley Fool vs Morningstar

When investing in the stock market, your investment research choice is critical. You can choose to do your own research or rely on free stock picks from questionable services. Or you can spend a few dollars a month on premium research and analysis from the same names that provide investment professionals the research to power their decisions. Check out our Motley Fool vs Morningstar comparison to see which service might be right for you.

Motley Fool Stock Advisor is Better for:Morningstar Investor is Better for:
Newer InvestorsIntermediate+ Investors
Easily Digested Info>Well-Explained Analysis
Simplified Monthly PicksMany Stocks, ETFs, Mutual Funds
Growth Stock InvestingNot Receiving Marketing Emails
Moderate Risk InvestingLower Risk Portfolio Building
Lower PriceMore Information
Beating S&P ReturnsEliminating Risk

Motley Fool and Morningstar are two companies that make professional-level research available to retail investors. In this article, Modest Money will take you through a comparison of the services provided by these companies to help you decide which one is optimal for you.

Motley Fool Morningstar
Annual Subscription Fees

Stock Advisor $199 ($89 for the first year with Modest Money)

$249 for Morningstar Investor ($199 first year price with Modest Money plus 7 days free)

Securities Analyzed

Stocks

Stocks, Mutual Funds, ETFs

Investment Strategies

Conclusions that merge quantitative and qualitative approaches

Quantitative (starred) and qualitative (gold, etc.) approaches distinctly separated by different ranking systems

Base Results

Moderately diversified portfolio of high performing stocks

Excellent diversification of self-built portfolio with multiple asset classes and risk tolerance levels

Base Use

Moderate Risk Investing

Low Risk Investing

Current Promotion

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Modest Money Overall Rating
4.9 rating based on 5 ratings
5.0 rating based on 5 ratings

Morningstar VS Motley Fool: Determining Factors?

Founded in 1993, Motley Fool is an investment research company with several subscription options. Modest Money will primarily evaluate Motley Fool’s flagship Stock Advisor subscription service for this comparison.

Morningstar is a Motley Fool alternative and an investment research company that also has an asset management division. Founded by Joe Mansueto in 1984, this research company has sufficient power to impact actual asset prices by its positive or negative rating.

Morningstar has various platforms, including its premium investment services division, credit ratings section, and analytics software program for professional investment managers. Since Modest Money is looking at how they stack up against Motley Fool, we will mainly consider Morningstar Investor, which offers investors news, research, and analysis on stocks, exchange-traded funds (ETFs), and mutual funds.

Motley Fool and Morningstar are both signature research companies. Use Motley Fool to make easy decisions involving two stocks a month. Use Morningstar if you have more time to dedicate to investment analysis and invest in ETFs and mutual funds.

Factor 1: Cost

Costs factor into the decisions of even the wealthiest people. That’s probably the primary reason why they are the wealthiest people.

After all, if you save an extra $20 per month in fees and invest it well, after ten years, your contributions will equal more than $3,300, assuming a 6% return. That’s how modest amounts of money grow into thousands: never underestimate the power of small amounts.

For the first factor, we’ll look at the respective costs of Motley Fool versus Morningstar.

Motley Fool’s Stock Advisor is Cheaper than Morningstar

  • Motley Fool Stock Advisor costs $199 per year
  • Morningstar Investor costs $249 per year
  • Stock Advisor is $4.17 cheaper monthly than Morningstar Investor

Motley Fool’s Cost

Motley Fool’s oldest and best-known subscription is Stock Advisor. Stock Advisor costs $199 per year, but you can buy it here for a healthy discount of $110, taking the cost of the flagship subscription service down to only $89 for the first year.

A brief description of what you’ll get with Stock Advisor:

  • Two new stock recommendations monthly
  • Sell notices based on current conditions
  • Best Buys Now—a monthly digest of top recommendations pulled from existing Stock Advisor picks

Stock Advisor culls its picks from every sector of the market.

Stock Advisor has a track record justifying its cost. As research companies go, it’s one of the best. You can read more about Stock Advisor’s impressive returns here.

Some other subscriptions to consider purchasing from Motley Fool are Rule Your Retirement ($149) and Rule Breakers ($199). Rule Breakers focuses on picking winners before they break out, a riskier strategy but one with a significant upside.

Morningstar Subscription Cost

Morningstar does not have as many subscriptions geared towards individual investors as Motley Fool, but Morningstar Investor is a powerful tool. Morningstar Investor will cost you $199 annually, slightly more than Stock Advisor.

This is what you’ll get with a Morningstar Investor subscription:

  • Instant X-Ray is a great tool providing analysis of the diversification of your portfolio, including recommendations on how you can further diversify your risk. It also ranks your investment portfolio by risk level and shows your expenses for your assets and other vital data.
  • Medalist Funds contain new investment ideas and ranks of mutual funds, stocks, and ETFs.
  • Quote Pages are deep dives into individual stocks, ETFs, and mutual funds.

You can read more about Morningstar Investor services here.

Independent analysis shows that Morningstar is more often right than not about its ratings. But since they are not limiting their picks to two stocks a month, you must read their reports thoroughly and decide which assets are the best match for your portfolio. This analysis is easier for investors with at least an intermediate level of experience.

You can get $50 off your first year with Morningstar Investor and a free 7-day trial by clicking here.

Motley Fool is Cheaper

Motley Fool offers Stock Advisor for $50 less than Morningstar Investor. This is a cost differential of only $4.17 per month, so it shouldn’t be the sole deciding factor when choosing between Motley Fool and Morningstar.

Factor 2: Strategy

A second factor to consider is strategy. The strategy a research firm uses to pick its stocks should match your own to have the most significant positive impact on your investments.

Morningstar’s Strategy is More Diversified than Motley Fool

  • Motley Fool gives you two stock picks per month
  • Morningstar Investor analyzes stocks, ETFs, and mutual funds
  • You can execute more investment strategies with Morningstar than with Motley Fool

Motley Fool Strategy

The strategy Motley Fool advocates for investors in its pick is a long-term buy-and-hold strategy. They urge investors to be prepared to leave their money in Motley Fool’s stock recommendations for at least five years.

This is a good strategy for individual stock investing and will help you weather the surges and declines of bull markets and subsequent market corrections. Holding stocks over a longer time horizon enables you to decrease the risks associated with short-term investing.

Furthermore, Motley Fool advocates holding at least 25 stocks at any given time. This is a good step in diversifying your portfolio but does not represent sufficient diversification if those are your sole investments.

Motley Fool chooses stock picks from any sector, but they gravitate towards high-growth stocks. These might be concentrated in a few sectors instead of spreading out through the entire market. As a result, you will not find too many restaurants or energy stocks in their picks.

In other words, you should have more means of diversifying your portfolio than those 25 stocks only. You can do this by setting up additional automated accounts through robo-advisors or other managed account options or even buying and choosing your index funds to supplement your individual stock strategy.

Morningstar Strategy

Morningstar’s analysis can enable multiple investment styles. It includes qualitative and quantitative analysis in its reports.

The “Morningstar Analyst Rating” is stylized in terms like “gold” and “silver” or “bronze.” These are qualitative ratings from their more than 150 independent analysts.

“Morningstar Ratings” are quantitatively driven. Morningstar derives them from proprietary models and data analysis.

Morningstar’s quantitative conclusions are denoted by starred ratings. The Morningstar Risk-Adjusted Return (MRAR), the foundation of their global quantitative research, uses expected utility theory to predict assets that are less likely to produce a poor outcome than an unexpectedly good one.

In other words, Morningstar ratings are pretty risk-tolerant. You have less chance of losing significant money than you do of making outsized gains.

In combination with Morningstar’s X-Ray portfolio feature, this strategy will help you build a well-diversified portfolio all by yourself.

If you are familiar with modern portfolio theory, you already realize the importance of diversifying risk in an investment portfolio. If not, take our word for it. Building a portfolio with the right mix of diversification can help you earn expected returns while minimizing the risk of losing significant amounts of money.

Morningstar’s Strategy is Preferable to Motley Fool

Overall, Modest Money prefers Morningstar’s diversification strategy to Motley Fool’s, especially with Morningstar’s X-Ray portfolio option, which allows you to see how well your portfolio is diversified and how you could make it better.

Motley Fool does have its place, however. For example, suppose you are only looking for targeted stock picks and supporting analysis because the rest of your portfolio is passively invested. In that case, Motley Fool’s strategy is not bad at all, and in those circumstances, it might even be preferable.

Factor 3: Aggressive Marketing Tactics

Modest Monet finds aggressive marketing tactics somewhat of a turn-off. When you are already paying money for a subscription service, the last thing you want is emails urging you to buy something else.

Morningstar Has Less Aggressive Marketing than Motley Fool

  • Motley Fool sends frequent upselling emails
  • Morningstar Investor does less internal marketing
  • Morningstar has the edge when it comes to less intrusive promotion tactics

Motley Fool’s Marketing

Motley Fool sends marketing emails even after you’ve signed up for Stock Advisor. While these often contain good deals and promos for their other offerings, they can seem a bit spammy. If you already get tons of emails and are used to it, this might not be an issue at all. And, of course, you can adjust your email settings to screen them out.

You can also opt-out of marketing emails from your “My Fool” account under “Email Settings.”

Morningstar Marketing

Morningstar won’t send you nearly as much clickbait as Motley Fool will. Whether valid, this adds to the credibility of the Morningstar Investor platform.

One reason that Morningstar does not try to sell you so many add-on products is that they don’t have many. Research products geared towards retail investors include only Morningstar’s basic and premium options.

Morningstar’s Marketing Approach is Preferable to Motley Fool’s

In Modest Money’s opinion, Motley Fool does a bad job by over-promoting itself in constant email barrages. Sending spammy emails is the worst approach it could take when informing customers of its other products. It needs to find another way.

Motley Fool is outstanding at what it does: finding and analyzing two stock picks per month. Take the steps early to screen out the additional emails, and its marketing will not even be a minor blip on your radar.

Factor 4: Performance

Cost, strategy, marketing—these are all critical factors when selecting an investment research firm. But how this research performs is the ultimate factor.

So how does the performance of Motley Fool’s Stock Advisor and Morningstar Investor compare?

Motley Fool and Morningstar Are Both Excellent Performers

  • Stock Advisor has achieved four times market gains since 2002
  • Morningstar’s research is used by everyone from hedge funds and banks to individuals
  • The best performing research for you will be according to your investment style

Motley Fool Stock Advisor Performance

Since its inception 20+ years ago, Motley Fool’s Stock Advisor picks have generated an average return of around four times that of the S&P 500.

If future results hold up to its record, choosing Motley Fool’s Stock Advisor will earn you four times the money you would make investing in an S&P index fund, well worth the $199 annual cost.

In Modest Money’s analysis, Motley Fool can achieve these results by maintaining its specific focus of picking two stocks per month. Anyone who subscribes to Stock Advisor can quickly and thoroughly understand what Stock Advisor is recommending you do monthly.

Stock Advisor’s sell notices should not be underestimated either. Too often, stock investors overly concentrate on what they should buy instead of what they should sell. Selling stocks that are or will be underperforming is even more critical than picking ones that will grow in value. You can lose all the money you have invested in a company if stock prices crash to zero.

The Best Buys Now is another high-performing Stock Advisor feature allowing new subscribers to do some catch-up investing on Stock Advisor’s previous picks, as well as enabling investors who passed on a stock initially not to make the same mistake twice.

Morningstar Performance

What can Modest Money say about the performance of the Morningstar Investor service? As one of the most respected and beloved investment research firms globally, it can shake markets with its recommendations.

Morningstar’s investment analysis is pervasive and thorough but is geared towards helping people make decisions, not making them for you. It will not tell you what stock to buy. Instead, it will only show you the assets which are currently performing well according to its mostly quant-driven analysis.

For that reason, the average return of Morningstar’s analysis as it compares to the S&P 500 cannot be quantified as it can with Motley Fool.

Morningstar covers a broader amount of assets. As the dominant investment research firm globally, professional analysts and funds continue to factor their ratings in their decisions.

Recently, Morningstar has been facing criticism about its mutual fund ratings. Some analysts claim that they have recently overrated mutual funds that subsequently underperformed.

It is an essential reminder that investment research firms are not always right, which is why diversification is needed to protect yourself and your investments.

Motley Fool and Morningstar Both Perform Admirably

Since Motley Fool focuses on picks and Morningstar provides a broader breadth of analysis, it is difficult to compare their performance.

Modest Money awards the ultimate category of performance to both companies in this case.

Motley Fool vs. Morningstar: The Bottom Line

The bottom line when choosing between Motley Fool’s Stock Advisor and Morningstar Investor is that they are both top competitors providing research in the investment industry.

Motley Fool is better for investors with an already diversified portfolio who want to buy individual stocks separately to beat the market with some of their investments.

Morningstar is better for investors who want to build their own well-diversified portfolio of stocks, mutual funds, and ETFs.

Overall, Modest Money awards 5.0 stars to Morningstar, but Motley Fool is a close second at 4.9 stars.

Motley Fool Stock Advisor is Better for:Morningstar Investor is Better for:
Newer InvestorsIntermediate+ Investors
Easily Digested InfoWell-Explained Analysis
Simplified Monthly PicksMany Stocks, ETFs, Mutual Funds
Growth Stock InvestingNot Receiving Marketing Emails
Moderate Risk InvestingLower Risk Portfolio Building
Lower PriceMore Information
Beating S&P ReturnsEliminating Risk

Motley Fool

Building a portfolio of 25 stocks that you hold for at least five years is the goal and the best use of Motley Fool. If past achievements predict future performance, you could beat the return of the S&P 500 by four times if you go with Motley Fool’s subscription service.

This investing style is especially ideal if you already have access to diversification in your portfolio through other investment advisory plans.

Motley Fool pros include its ease of use, targeted picks, and low price.

The Motley Fool free trial is great, but to get Stock Advisor’s monthly stock picks for an introductory price of $89 per year, click here to open your account for a Motley Fool discount.

Morningstar Investor

Our Morningstar review is a favorable one as well. Suppose you are into building your own well-diversified portfolio that includes multiple asset classes and making your own decisions about your investment strategy. In that case, Morningstar Investor is probably a better fit.

As a premium service, Morningstar’s approach to providing subscribers will thorough and well-vetted information is unbeatable.

Morningstar pros include its reputation and historically correct analysis. Morningstar’s X-Ray Portfolio service helps you achieve optimal asset allocation.

Morningstar Investor pricing is slightly higher than that of Stock Advisor.

With its 7-day free trial, you lose nothing by trying Morningstar Investor out. Additionally, you can click here to get Modest Money’s special Morningstar subscription discount of $100 off the first year.

Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. After working many years in the website marketing industry, he decided to take on blogging full time and also get his finances headed in the right direction. Also check out his contributions to Equities.com and Benzinga.