Today, Motley Fool Asset Management, a fund company affiliated with The Motley Fool website, is rolling out its first ETF. The Motley Fool 100 Index ETF (TMFC) tracks a 100-stock index that consists of companies that have been recommended by The Motley Fool website or its analysts. The Motley Fool website, which targets investing news and analysis at individual investors, just celebrated its 25th year of existence.
TMFC comes with an expense ratio of 0.50% and lists on Cboe Global Markets, the parent company of ETF.com.
“We feel that having an easily investable solution like this is just a great way to spread the message that owning stocks for the long term is one of the most powerful wealth-creating mechanisms that we know of,” said Bryan Hinmon, chief investment officer of Motley Fool Asset Management.
“It’s a way to get easy, instant diversification of high-quality companies that have the Motley Fool seal of approval,” he added.
Components of the index must either be recommended as “buy” by the Motley Fool website or its associated publications, or they must be included as one of the top 150 stocks in the company’s “Fool IQ” database of companies and their associated analyst opinions. From there, the methodology selects the largest 100 and most liquid U.S.-listed companies and weights them by market capitalization.
According to the prospectus, the Motley Fool 100 Index is rebalanced and reconstituted on a quarterly basis.
The Fool 100 has a 44.8% weight in information technology, a 17.5% weight in consumer discretionary stocks and a 13.1% weight in health care. In fact, its three largest companies fall into its largest sector: Apple, with an 8.8% weight; Alphabet, 7.6%; and Microsoft, 6.6%.
The backtested index has returned 204.76% since inception (data goes back to 2007) relative to a 138.4% return for the S&P 500 during the same time period. Plus, the Fool 100 has outperformed the S&P 500 in eight of the last 11 years, according to the backtested data.
“Really, one of the things that helps explains why that might be the case is the types of businesses that the Motley Fool tends to recommend for purchase,” said Hinmon. “It really focuses on quality businesses, and it focuses on some of the qualitative aspects of business such as management and culture. The Motley Fool believes that, over time, those qualitative factors really matter when it comes to outperformance.”
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