Here is an idiosyncratic website which has educational value, in particular for novice investors who do not have a trading mentality. You may outgrow the Motley Fool UK website, but you will not be able to forget it. It is far from perfect but it has educated a generation of young investors and inspired them to think for themselves. The UK Fool, nine years old in September 2006, has come of age. It is a more professional product than in its early days and more sober.
In 1997, David Berger, a UK-based general practitioner (GP), was working part time to establish the UK Fool (www.fool.co.uk). The Fool was iconoclastic and persuasive although, in common with the financial services industry it criticized, not always right. The approach was heavily modelled on that of the site’s US parent (www.fool.com). ‘We’re amateurs,’ Berger told me with a shrug when we once met in the small London basement flat that served as the site’s start-up HQ. He was too modest, although, in those early days, the quirky writing style was out of kilter with conventional journalism.
The Fool has tried to teach users of its site to pick their own stocks and make their own investment decisions. There has been an emphasis on understanding the underlying company, and on keeping trading costs low. The site was, and still is, run by self-styled Fools (with a large F) in the Shakespearean sense, who tell the king the truth when others merely flatter him. They are critical of the Wise, who are commission-hungry financial services salespeople, including stockbrokers, tipsters and the like.
The Fool had an enveloping culture, and it fast created almost a cult. Berger talked to me of how the approved ways of doing things were ‘very Foolish’, meaning to ask the right innocent questions. His vision was to expand the Fool concept beyond financial services. It turned out to be too ambitious.
Berger had brought to the table his own talents, which included a tongue-in-cheek writing style that in places reached rare levels of hilarity, and a good knowledge of the biotechnology sector. In those early days, the writing style was a little wild and it pushed the Fool culture, says Stuart Watson, who has been with the operation seven years and now runs the editorial department. ‘This was necessary to establish the brand, but it became less important as the company became more mass market,’ he says.
In those early days, the Motley Fool focused 80 per cent on the stock market and 20 per cent on personal finance investment, according to Watson. The site shunned technical analysis and the trading mentality, and it leaned heavily towards value, growth and high-yield investing. It urged investors to avoid actively managed unit trusts but instead to buy tracker funds, where the charges were low and the performance, after all costs, usually bent the market average. Jim Slater, the private investor guru, spoke highly of the UK Motley Fool.
The Fool produced reams of material online to educate investors. It ran online portfolios, which were not tip sheets but where the Fool bought shares, and kept a live online commentary about their performance. The Fool made a lot of mistakes in its stock selections but it was frank about its thought processes online. An online community of like-minded Fools was building up through the bulletin boards.
In 2001, a year after the high-tech stock market bubble had burst, Berger quit his job and returned to being a GP full time. The show seemed gradually to lose some of the earlier sparkle. The online portfolios eventually disappeared because, according to Watson, they took more time to keep up than the viewing statistics justified.
In the five years leading to mid-2006, the UK Motley Fool has increasingly focused more on personal finance than stock market investment. A spokesman says: ‘Fewer people look at our stock market material these days but they spend longer on it than they do on the personal finance areas of our site.’ The site contacts 2.3 million subscribers with e-mail letters twice a week. A smaller audience also receives a twice-weekly e-mail dedicated to investing. The site has editorial and news, commentary and one subscription tip sheet, which uses a wide range of stock-picking techniques. The style of investment advocated by the site reflects that of the writers employed at any given time and is not decided centrally, according to Watson.
The site takes revenue from selling advertising space and, more substan¬tially, from referring its customers to financial services via its product comparison centres. The online discussion boards are not sponsored but some are dedicated to the products of specific firms such as Barclays Stockbrokers and Legal & General.
