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Well, Mr. Reed, I must disagree. real estate investment advice can't possibly be worse than stock investing advice! Some of the real estate gurus that Mr. Reed exposes in his website have even moved from real estate advice to investing advice, either because they were having trouble keeping their real estate business out of bankruptcy court or simply because they sensed that stock investing had even wider appeal and higher profit margins. Both Charles Givens and Wade Cook took this route.
I'm not really disagreeing with John Reed. His point about targeting the ignorant is true for any system that professes to make you an overnight millionaire. I might quibble with his choice of words, though. I don't like to refer to anyone as ignorant, preferring to think of them as uniformed or lacking in self-confidence (yeah, I'm a bleeding heart liberal, I guess), but however you term it, the concept is the same. These advice sharks are targeting the vulnerable.
The Motley Fool also "targets" the vulnerable. We aim to serve all individual investors, but we devote many, many Web pages to beginning investors or investors who are just moving from mutual funds into specific stocks. What's different about us? Are we different? Not everyone thinks so.
One way we are different is that our advice is free. We will pass over a discussion about whether anything is truly free. To the economists out there I will grant that very little is really free, and to the anarchists I will grant that our site is supported by advertising, FoolMart, Research reports, Soapbox, books, etc., in a very capitalist way, and that to view it one must have access to an expensive machine. OK?
The fact remains that most of our advice is freely given with no direct tie between what we advise and your wallet. It makes no difference to our bottom line whether you invest in an index fund (Step 4) or follow the Foolish Four or buy Rule Breaker stocks. How many pages you visit on this site and how many ads you click certainly makes a difference to our bottom line but not your investing choices.
We occasionally get e-mails about our business model that criticize our reliance on advertising or the other moneymaking aspects of the Fool. "The Web should be free, man" is the general sentiment. Lovely thought.
I have to assume that these writers are inexperienced in the ways of the world (there I go again). Our techies may be good but I don't think that they are up to building servers and routers from recycled soda cans and old ketchup bottles. I, personally, prefer to sleep in a bed rather than on a park bench. And my kids have this annoying habit of demanding food every few hours.
So, yeah, we're in it for the money, too. In a way the difference between the Fool and some of those investment advice sharks we've been discussing this week is the same as the difference between a "free" financial planner and a fee-only financial planner. Free financial planners generate their income from commissions. Naturally, they tend to steer their clients toward the investments that pay commissions, and, depending on their integrity, they may base their recommendations mostly or solely on which investment vehicle pays (them) the best.
Fee-only financial planners charge their clients cash up-front, either a flat fee or an hourly rate. In this case, that's good -- very good. The financial planner can send her kids to college, and you get advice based on what is best for your bottom line, not hers.
Ummm, I guess in this case the parallel is between the "free" Motley Fool and the fee-only financial planner, not the "free" financial planner. Did you follow that? I think my parallels are crossing. I'm expecting e-mail from math teachers on this.
The point is that everyone has a bottom line. Even those guys who think the Web should be free have to cover their pizza and beer costs. The trick is to understand the motivation of the people you are dealing with and align it with your own.
Now, the Wade Cooks of the world will tell you that their advice has to be good because people keep coming back for more. They will say that they are motivated to provide good advice in order to keep their customers.
That's a very valid argument. So let's look at it more closely. When advice is good, people do keep coming back for more. And they tell their friends, and they tell their friends, and so on. Good advice doesn't need a massive hard-sell machine running constantly to keep it going. When the hard sell cranks up, get going.
Another big difference between the Fool and the Advice Sharks is that we allow and encourage dissent. Anyone can flame us in public on our very own discussion boards and, as long as the language meets minimal standards of civility, that criticism will stay on our site forever. You won't find that at WadeCook.com.
The Fool is dedicated to open and civil debate. To me that is so important that it dwarfs everything else. Talk about empowering people! Don't like something I say? Click that link below to go straight to the Foolish Four discussion board and tell the world. Tell them when I've made a mistake. Or click my byline and you will see a link to e-mail me directly (or just send mail to [email protected]). All of our writers are accessible, and all of our discussion boards welcome opinions contrary to our own.
Hey, those contrary opinions encourage more posts, and more post mean more pages for people to click. See what I mean about aligning our interests?
Fool on and prosper!
"Real estate investment advice is the only field I know where the worst material available is also the most expensive. There is a logical reason for this. Knowledgeable people won't overpay for advice. Only ignorant people will. So gurus who want to charge extremely high prices must necessarily target the ignorant. Since the audience is ignorant, the gurus in question are free to offer material that merely sounds good."
-- John T. Reed