As you probably know by now, yesterday we announced that we would be closing our real-money portfolios at the end of this month. This means that last week's Rule Maker column will be the final regularly scheduled one. After a five-year run, the Rule Maker Portfolio will be no more.

Any feelings of regret aside, I believe this is the right decision. The real-money portfolios were a bold experiment. No one, and I mean no one, in the financial industry had ever thought of something so brash. We're going to manage our money online, to a defined set of rules, and we're going to tell you in advance what it is that we're going to do.

Contrast this with the mutual fund industry, which has just been shot down by the SEC in its proposal to only have to disclose a representative sampling of holdings each quarter to investors. They didn't want you to pry into their business before the Fool came along, and they still don't want to show their investors what they are doing. A few mutual funds tried to buck the trend by giving owners real-time looks into their activities, but these experiments lasted a very short time. Perhaps those who ran these funds were more interested in the gimmicks than the overall performance.

But when the Rule Maker was set up in 1998, it was operating under an extremely different environment than today. You think I'm going to talk about the stock market bubble, don't you?

No, I mean that, in the early stages of Internet media, there was a belief that online content was significantly scalable and would bring about the death of other print media, such as newspapers. We had a substantial staff available to manage each of our real-money portfolios. The Rule Maker Portfolio at one point had eight people managing various elements. Allow me to make a significant understatement: Those resources somewhat outstripped the amount of value The Motley Fool derived from the portfolios. As such, we cut back -- a lot.

Now, Rule Maker management, in its entirety, falls to me. Its management takes up a significant amount of my time, and it should take up much, much more. When the big scandals at Schering-Plough (NYSE: SGP) hit this past year, I must confess that I was clueless as to their cause. Constrained by all of my responsibilities here at the Fool, I didn't have time to follow all of the companies in the Rule Maker Portfolio, and the performance of the port certainly suffered as a result. This is not ideal. It's not even acceptable, and from a resource standpoint, there's no way around it.

When I took over the portfolio last January, one of the first things I said was that I'd like to de-emphasize the real-money component, that I'd like to focus on this being a forum where people come in and spell out their investment ideas using the Rule Maker criteria. In fact, this section from a Rule Maker report on Jan. 9, 2002 is pretty important, so I'll reprint it here:

De-emphasizing our portfolio. Despite efforts to the contrary, we continue to receive correspondence from people who believe that our real-money portfolio constitutes stock recommendations. We are pretty blue in the face from repeating over and over that this is a teaching tool, not a portfolio full of recommended stocks that should be copied. So while I do not purport to be able to keep people from doing stupid things, I must also recognize the fact that for whatever reason, what should be a teaching portfolio is viewed quite differently by a significant subset of our readers. Where perception conflicts with reality, sometimes reality must budge first. I think that the real-money portfolio is nice from a credibility standpoint, but is probably detrimental from a teaching standpoint. The Rule Maker is supposed to provide a construct so investors can think rationally about being business owners, and we should in no way feel limited to covering the companies we own. In fact, ownership of certain companies should almost be beside the point.

In the months following that article, we rebuilt the Rule Maker criteria. I'm convinced that the criteria as they are spelled out provide an excellent construct for analyzing large-capitalization companies. But the whole "de-emphasizing the portfolio" thing did not quite go as planned. After we redefined the rules, in April I took my first look at the companies still in the portfolio. Obviously, I knew what stocks were there, but with few exceptions I hadn't really kept up with these companies. And now, in a public forum, I had to manage a port that included them, and was to be graded on the performance. All I knew was that I was damned if I were going to be graded on a portfolio dominated by Yahoo! (Nasdaq: YHOO), Cisco (Nasdaq: CSCO), and Microsoft (Nasdaq: MSFT). So we cut them loose, replacing them with some fine corporations like General Dynamics (NYSE: GD) and Costco (Nasdaq: COST), and adding to some others.

These were changes that needed to be made if we were to have a portfolio at all, in my opinion. The changes themselves had a counterproductive element, though. They brought attention back to the portfolio instead of the strategy. And, as a result, I started getting emails from folks asking me why Company X wasn't a Rule Maker. Some came from folks who have been following the portfolio for years.

Full stop. That's why the portfolio component of Rule Maker has outlived its usefulness -- it provides too much confusion. The portfolio, at this point, consists of what I think are Rule Makers, not some definitive list. We have never been able to get past this confusion with a large portion of our audience. We want to focus on helping people identify their own Rule Makers. The portfolio brought substantial attention to the strategy, but then ultimately detracted from it.

Ending the Rule Maker Portfolio right at this moment is bittersweet for me. On the one hand, I think the above points are reason enough to shut down the ports. But on the other, we've just changed things and I would dearly love to see if we could right the mistakes made in this port in 2000-2001. Further, I think the picks we made in the last year will prove to be fantastic in the next few years.

But this bears repeating: The Rule Maker strategy is not going anywhere. If anything, we're releasing it from this small corner of Fooldom. It will remain a significant component of the Fool pantheon. Moreover, when Tom Jacobs, who previously had been dedicated to the Rule Breaker Portfolio, wants to analyze a substantial company like Amgen (Nasdaq: AMGN) (which has sat forever in the Rule Breaker Port, even though it is a massive company), he can pull up the trusty-dusty Rule Maker criteria and use it. And the companies that sit in the Rule Maker Portfolio were not chosen by accident. They gained representation in this portfolio because they demonstrate tendencies that we see in excellent companies. If you've been around the Fool for a while, you'll know that we like little more than to talk about the best companies, so you'll continue to hear about these, and you'll continue to see us use the Rule Maker strategy.

This transition will open up many more opportunities for us to educate, amuse, and enrich. I promise.

To close, below are the results for the Rule Maker Portfolio from February 1998 to today, five years later. We'll talk next week about where we're going from here.

Internal Rate of Return 2/98-2/03
   RM        S&P      S&P 500
  Port       500     Divs. Added    
 (11.9)%    (8.6)%     (7.1%)

Fool on!

Bill Mann, TMFOtter on the Fool Discussion Boards

Bill Mann is the senior editor of The Motley Fool Select, where you can find his best Foolish stock ideas that you won't find anywhere else. Bill owns shares of Costco, Cisco, and General Dynamics.