Not long after I started working at the Fool I came across an article penned by a fellow Fool called "The 4 Best Words of Investing Advice." As it turned out, those words were not "But what you know" or "Buy low, sell high," but "Buy an index fund." Here's how he made the case for that:

This is the most actionable, most mathematically supported, short-form investment advice ever... If you look up The Motley Fool in the encyclopedia -- or at least on Wikipedia -- you'll find that we are "famous for [our] view that, for the majority of people who have little time to keep track of stocks, the best investment strategy can be summed up in four words: 'Buy an index fund.'" That remains true. If you've got little time to keep track of stocks, this really is the best investment advice around.

It long bothered me that we didn't have an index of our own. After all, The Motley Fool had and has lots of stock ideas; it was just a matter of putting them together in a logical way. Ten years later we finally got around to it, and the result is the Motley Fool 100 Index.

Bubbles with different concepts connected by bright lines, person with ipad in the background.

Image source: Getty Images.

What makes the Fool 100 different
A simple idea powers the Fool 100: we'd rather own high-quality businesses than low-quality businesses.

Because we believe that, over the long-term, stronger companies will outperform weaker companies. And, as shareholders, we will eventually reap the rewards of this outperformance.

It's just common sense really.

Yet many popular indexes ignore this simple principle. Take the S&P 500, the world's most widely followed index, as an example. Instead of focusing on quality, the S&P 500 blindly picks the market's largest companies by market cap. And that means when you buy any financial product tied to the S&P 500, such as an ETF or index fund...yes, you may end up with exposure to some of the best companies in the world...but you may also end up with exposure to some low-quality business for no other reason than these low-quality businesses happen to be big.

Here are a couple of painful examples: Enron was included in the S&P 500 in 2001...and Lehman Brothers was included in 2008.

That's not to say that every company included in the Fool 100 will be a winner...because we will surely have some losers in there. The point is simply that because the Fool 100 tries to only include high quality companies with smart management teams, we believe that we have a better chance of avoiding exposure to companies like Enron and Lehman Brothers.

And that's one reason we believe an index of high-quality companies with smart management teams can outperform a portfolio built by blindly picking all 500 of the market's biggest stocks.

Meet the Fool 100
The Fool 100 is a new market-cap weighted index that measures the performance of The Motley Fool's 100 largest investment ideas.

Every company included in the index is incorporated and listed in the US.

And every company included in the index is either an open buy recommendations in one of our research publications Motley Fool Stock Advisor, Motley Fool Hidden Gems, Motley Fool Income InvestorMotley Fool Inside Value, and Motley Fool Rule Breakers, or ranks among the top 150 US. stocks in The Motley Fool's Fool IQ research database. 

This means that a company can only be included in the Fool 100 after undergoing a painstaking selection and review process by our team of analysts.

This is the same review and selection process that has led to the success of many of The Motley Fool's publications. And this is the process that we believe will give the Fool 100 a leg-up on indexes that blindly pick companies merely on size.

What's more, at The Motley Fool we are looking for the companies that are going to drive innovation for the next decade and beyond. This means that our recommendations tend to focus more on the technology and consumer sectors than on commodity or industrial companies.

You can see this reflected in the Fool 100's current top 10 constituents:

Constituent Allocation
Apple 8.8%
Alphabet 7.6%
Microsoft 6.6%
Amazon 6%
Berkshire Hathaway 5%
Facebook 4.9%
Johnson & Johnson 3.8%
Visa 2.6%
UnitedHealth Group 2.2%
Home Depot 2.1%

Data as of 12/29/17.

As well as in its overall sector exposures:

Sector Allocation
Information Technology 44.8%
Consumer Discretionary 17.5%
Healthcare 13.1%
Financials 7%
Industrials 3.8%
Consumer Staples 3.7%
Energy 3.7%
Telecommunication Services 2.7%
Real Estate 2%
Materials 1%

Data as of 12/29/17.

Having said that, it's quite possible this could change in the future. That's because the index is updated every quarter to reflect the latest-and-greatest analyst picks and ratings.

What you can do with the Fool 100
We're hopeful our new Fool 100 Index can serve several purposes in the market. First, you can use it as barometer for how the most Foolish parts of the stock market are performing. In fact, we now display our Fool 100 returns right on fool.com.

Second, you can compete against it. We invite you to see if your performance is better than ours.

Finally, since the index constituents all meet liquidity requirements, the Fool 100 may be used by a financial institution, including certain of our affiliates, to create an index-linked investment product, such as an ETF, which would seek to match the index composition and performance as closely as possible before fees. Learn more at www.fool100.com.

The Motley Fool (TMF) constructs, publishes, and licenses indices and does not offer or provide investment advice or offer or sell any securities, commodities or derivative instruments or products, and nothing on this website should be taken as constituting financial or investment advice. Unlike its affiliates, TMF is not registered with the SEC and is not permitted to provide investment advice. Neither TMF nor its respective directors, officers, employees or affiliates make any representation regarding the advisability of investing in any security or instrument. A decision to invest in any such security or instrument should not be made in reliance on any information on this website. Inclusion of a security in an index is not a recommendation to buy, sell or hold that security.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Tim Hanson owns shares of Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Microsoft, and Visa. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Facebook, Johnson & Johnson, and Visa. The Motley Fool has the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, short May 2018 $175 calls on Home Depot, and long January 2020 $110 calls on Home Depot. The Motley Fool recommends Home Depot and UnitedHealth Group. The Motley Fool has a disclosure policy.