What Happened to the Foolish Four?
The Foolish Four was the first mechanical strategy developed by the Motley Fool community. For a while, it was our only mechanical strategy and, for a while, we thought it was the greatest thing since online stock trading. But the strategy was questioned by a number of critics, both within the Fool and without, who found it statistically wanting.
We responded to the critics by conducting the most extensive test that we know of on the historical performance of high yield/low price Dow strategies. This far more comprehensive backtest revealed that the high returns quoted by us and by others (Beating the Dow, the Dogs of the Dow, and certain mutual funds come to mind) was mostly ephemeral. When we looked farther back in time and at portfolios not run on a calendar year basis, most of the outperformance that had so excited us dissipated. We were left with an estimated outperformance of less than 2% per year, which sounds OK until you compare it with our original expectations or with the far more tax efficient index funds.
In December 2000, we announced that we were no longer advocating the use of the Foolish Four as a general-purpose strategy suitable for most investors. It may have some value in a diversified retirement account where taxes are not an issue. The Foolish Four is being used now as a value strategy to balance out our heavily growth-oriented Workshop Portfolio. Not wanting to sweep anything under the rug, the Foolish Four area has been kept intact with some modifications to ensure that anyone who stumbles upon it will be adequately warned of our change in attitude. The links below will take you to our Foolish Four content.
For details on the new research and our current expectations for the strategy see the following articles:
Original Area Content
The Foolish Four, and other Dow Investing Strategies, Explained
This is a relatively detailed explanation of how the various Dow Investing strategies, including our favorite, the Foolish Four, work. Warning: It's long -- print it out for bed time reading.
The Foolish Four Portfolio Report (discontinued)
Read the last portfolio report.
Today's Stock Lists
An automatic stock list generator that uses price and dividend yield to rank Dow and other large cap companies according to the Foolish Four formula.
YTD Dow Returns
Year-to-date returns for various Dow-based Strategies and each individual Dow stock -- a good place to compare various strategies.
The Foolish Four Evolves
An article that explains the changes that Foolish Four has gone through.
A History of the Dow
A history of the Dow Jones Industrial Average written on its 100th Anniversary. The series includes lists of original and current DJIA stocks as well as an explanation of how the Dow is calculated.
How the Foolish Four has performed for the past four decades.
Discuss The Foolish Four
Our Dow Investing/Foolish Four message board. In order to post any questions or answers, you will need to register for our message boards (it's free) and log in. If you just want to read the posts, have at it!
All the Foolish Four reports that ever were. For future information on the Foolish Four see the Workshop area.