Motley Fool Rule Breakers Review – Is This Stock Service Worth It?

Rule Breakers is a highly successful stock recommendation service from The Motley Fool. It’s been around since 2004 and has more than doubled the performance of the S&P 500 since its inception as of February 2023.

Rule Breakers is designed for long-term growth investors who want to buy shares of disruptive tech companies. In our Rule Breaker review, we’ll explain everything this service has to offer.

Motley Fool Rule Breakers Pricing Options

Rule Breakers costs $299 per year and comes with a 30-day membership fee-back guarantee.

You can also buy Rule Breakers as part of Motley Fool’s Epic Bundle. This includes Rule Breakers and three additional stock picking services: Stock Advisor, Everlasting Stocks, and Real Estate Winners.

Rule Breakers Investing Style

Rule Breakers was launched in 2004 by David Gardner, one of the co-founders of The Motley Fool. David Gardner was already making growth stock recommendations for Stock Advisor, but wanted to focus more specifically on the rapidly growing tech sector. Gardner has since moved into semi-retirement at Motley Fool, but the analyst team he put together remains in charge of choosing stocks for Rule Breakers.

Motley Fool Rule Breakers is designed for long-term growth investors. Most of the stocks that this service recommends are in the tech sector or bring a tech solution to established industries. For example, Rule Breakers frequently recommends growing healthtech, fintech, and insurtech companies. The overall goal is to identify potentially disruptive companies that could become future giants in their fields.

Rule Breakers has a time horizon of 5 years, meaning that investors are expected to hold positions for at least that long. Often, winning stocks are held for significantly longer and are re-recommended several times. Vertex Pharmaceuticals, which has returned nearly 2,700% for Rule Breakers as of February 2023, has been in the portfolio since 2005 and was re-recommended in 2007 and 2022.

It’s worth noting that the Rule Breakers and Stock Advisor services take extremely similar investment approaches. Both focus on explosive growth stocks and share a 5-year time horizon. Rule Breakers is slightly more tech-centric, but in reality, there’s a lot of overlap between the two services.

Many investors choose to combine Rule Breakers and Stock Advisor to get more growth stock picks. In fact, The Motley Fool encourages this with its Epic Bundle offering, which includes both services.

Motley Fool Rule Breakers Stock Pick Format

The Rule Breakers service provides two new stock recommendations per month, roughly two weeks apart. Each recommendation is accompanied by a brief overview of what The Motley Fool’s analyst team likes about the company and what they see as potential long-term risks.

These summaries are beginner-friendly and don’t go into a ton of detail. They’re great if you’re the type of person who wants to have a rough idea of what you’re investing in or choose which recommendations to follow. If you just want to invest in every new recommendation, you can do that, too. Rule Breakers doesn’t focus too much on entry prices, so you can buy anytime within a few days of when the recommendation comes out.

The current portfolio is tracked in an interactive table that you can sort by ticker symbol, recommendation date, return, and more. It’s relatively infrequent that Rule Breakers recommends exiting a position – the service is keen on the idea of letting winners run. When it does happen, the Rule Breakers analyst team will post an update about the sale and explain the reasoning behind it. You can view all closed positions in another interactive table.

The flip side of this approach is that Rule Breakers tends to hold onto losing stocks for far longer than many investing experts would recommend. Looking through the list of closed positions, there are dozens of stocks that lost 80-99% for Rule Breakers investors and relatively few that lost 10% or less. Rule Breakers overall has a great track record of beating the market, but it’s important to know that you could lose big on individual stock recommendations.

Additional Features

While the main thing you get with Rule Breakers is the pair of new stock picks each month, the service includes a few extra features.

First, there’s the foundational stocks list. These are 10 stocks that the Rule Breakers team thinks every growth investor should keep in their portfolio. The list doesn’t change much over time. Instead, it’s designed to help investors who are new to Rule Breakers get their portfolio off the ground while they wait for new stock picks.

Rule Breakers also keeps a list of 10 recommended stocks to buy now. These are ranked, making it easy to know where to invest any extra cash you have on hand in between new recommendations. If you’re not excited about a new recommendation, you can also double down on one of the stocks in this list instead.

The Rule Breakers team provides short updates about the 10 best buy now stocks at the beginning of every month. These offer a quick summary of why the stock is worth looking at right now, but there isn’t a lot of in-depth analysis. If Rule Breakers analysts really think a stock that’s already in the portfolio should be purchased, it may be re-recommended in lieu of a completely new stock pick.

Motley Fool Rule Breakers Performance

Between launching in 2004 and February 10, 2023, Rule Breakers has returned 207% compared to 102% for the S&P 500. That means this service has more than doubled investors’ money compared to what they would have earned if they had simply invested in an index fund.

Rule Breakers tends to hold onto winners for a long time and double-down on stocks that still have room to run. As a result, there are 17 active positions and 3 closed positions that have gained more than 1,000% as of early 2023.

Even with these big wins, the service’s returns were relatively linear until the COVID-19 pandemic, when Rule Breaker’s performance turned essentially vertical. The service’s portfolio more than doubled in value between the beginning of 2020 and the end of 2022. The S&P 500 gained around 28% over the same period.

However, Rule Breakers is heavily exposed to the tech sector, so the portfolio was hit disproportionately hard in 2022. The S&P 500 lost around 19% in 2022, while Rule Breakers lost nearly 40%. The Rule Breakers portfolio is currently holding 11 active positions that have lost 80% or more. Investors might want to consider using stop loss orders to minimize some of these bad losses, although Rule Breakers does not recommend stop losses.

Keep in mind that even with last year’s losses, Rule Breakers still outperformed the S&P 500 from 2020 to early 2023.

What Type of Investor is Motley Fool Rule Breakers Best For?

Rule Breakers is a great option for long-term growth investors. The stock picks are easy to follow, making it suitable for beginners. More experienced investors can use Rule Breaker recommendations as a starting point for their own research – or simply buy them given that this service has beaten the S&P 500 by more than two-to-one as of February 2023.

Investors should keep in mind that Rule Breakers picks can suffer significant losses, especially if you start with the service in the middle of a market downturn. The relatively long time horizon of stock picks should smooth out these losses, but Rule Breakers might be a little too risky for some conservative investors.

It’s worth considering whether you would be better served with Rule Breakers or Stock Advisor, The Motley Fool’s flagship service. At $199 per month, Stock Advisor is slightly cheaper. Stock Advisor also offers stock picks from two different teams of analysts instead of two picks from a single team. If you have to pick one service, Stock Advisor is a better place to start for many investors.

That said, Motley Fool’s Epic Bundle offers both services and two additional services for $499. Combining Stock Advisor and Rule Breakers enables you to build your portfolio more quickly and include a wider range of stock picks.