Motley Fool Stock Quotes

These steps will help you remember that correlation is not causation, and that most market prophecies are based on coincidental patterns. That was the problem in the late 1990s at the Motley Fool website. Its Foolish Four portfolios were based on research claiming that factors like the ratio of a company’s dividend yield to the square root of its stock price could predict future outperformance. In the long run, however, a company’s stock can rise only if its underlying business earns more money.

Action: Get in touch with your inner investor. Do you know your time horizon and tolerance for risk and loss? Do you want to research stocks? Start an investing journal. Every time you think about buying or selling one of your holdings, make a note of why, how you are feeling at the time, and what would have to go differently for you to change your mind.  

But for now, we simply recommend that for every dollar you put into individual stocks, you roll the same amount into an index fund.

the Motley Fool’s goofy ratio couldn’t possibly be causing stock prices to rise, the only sensible conclusion was that its predictive power was an illusion. The Foolish Four portfolio made investors feel like idiots when it lost 14% in the year 2000 alone. Meanwhile, after six years of underperforming the market by nearly two percentage points annually, the Harry Dent–inspired mutual fund shut down in mid-2005 with the Dow mired about 31,000 points below his forecast.