As our long-time readers know, all Motley Fool real-money portfolios have always made a point of announcing their trades BEFORE execution... and they ALWAYS WILL. At first we announced trades one day before executions, but we too often saw the traded stocks move dramatically away from us on that trade day. Bad for us, and bad for you, too. We weren't terribly surprised, frankly, for a few reasons. The first is that the Fool Portfolio has been very successful, and success begets attention. Second -- and unfortunately -- due to that success and attention, we suspect that many people began following the trades, and in some cases, mirroring them. And third, there is even a chance that Wall Street market makers were getting wind of our proposed trades like anyone else, and might have artificially jumped up the ask price for buys, or artificially dropped the bid price for sells.

This meant we didn't get our stocks at the prices we'd've liked. Of course, we could always go to the STANDARD Wall Street model of loading up on the stocks FIRST, then later (say, a day or two) tell you what we already own. Would that be Foolish, though? Nope. Never.

So in late 1996 we came up with a new way of announcing Fool trades. Namely, when we announce an intention to trade, we will make that trade within the next WEEK (five business days), as opposed to the next day.

OK, what does this mean? Well, first off, it means that when we say we're going to buy Frankie's Hot Air Balloons (Nasdaq: SINK), we will NOT necessarily jump into Frankie's on the next day. In our recent experience, we could expect Frankie's -- which, say, closed at $34 1/2 the day before -- to open at $37 on our announcement. Maybe we think that's silly, that $37 is too high and we can get a better price. (Maybe you think the same thing, too.) Well, from now on, we have one week -- not just one high-pressure day -- to buy this operator of hot-air balloon rides. Maybe we can get it for $34 1/2 two days later. Maybe we can get it for $33 four days later. Or maybe it floats away to $55. Who knows?

One thing's for sure in this scenario, though... we will get it AT SOME PRICE in the next week. That's our solemn commitment.

Our new policy should smooth out what have in the past been occasionally exaggerated moves in stocks the day that we trade them. We've never wanted or liked that... we gain no benefit from it. In fact, we get hosed just as anybody else would when the stocks jump or dive! Our new policy should reduce the "day after" moves. But even if for some reason it doesn't, it'll give The Fool Portfolio more freedom to try get a price it likes without being slave to the whims of market makers. (Though in the long run, the small price differences shouldn't make any difference, actually.)

If the policy needs any further clarification, please read our Foolishly Answered Questions format, below:

Q: Hey, does this mean that you blokes won't ever buy the next day?

A: No, it doesn't. We may still execute the trade at market open of the next day. Again, when we announce a trade, we are COMMITTING to make the trade at some point in the next week (5 market trading days).

Q: OK, so what if you announce on a Sunday night that you're going to buy a small-cap stock, and it opens up $2 to $22 on Monday, rises $2 more on Tuesday, Wednesday, and Thursday, and you haven't bought and it's at $28 and it's Friday?

A: We buy it. We said we would. We will. No questions asked.

Q: I understand that accountability is important to you guys. Will you announce when you have actually made the trade?

A: Of course! Yes, the day we do make the trade, we'll announce it as usual in our Fool Portfolio recap.

Q: Does this go for The Fool Portfolio and the Boring Portfolio?

A: Yep, and any future portfolios we open in our hallowed Hall. This is the standard Fool policy.

Q: I'm one of the people who paid $12 to subscribe for one year to your Foolish e-mail list. I say you guys should give us something extra... you know, e-mail us your trade ahead of the general announcement.

A: Sorry... we the managers don't front-run our picks, nobody at Fool HQ does, and no select group of our readers does. We won't allow it. The Foolish E-Mail List is a service we offer to people who don't get to sign into Fooldom every night, and would like to read our announcements by e-mail. That's the sum total of the purpose of the product.

Q: That's it! You Fools have gone Wise... you are no longer serving your readers with this policy. After all, the Fool Portfolio has always made it possible for me to duplicate the returns of the portfolio... you made it possible for me to get the same price you did.

A: Actually, that was always PART of our aim, since we wanted to serve you better than financial newsletters that bought their picks in advance of the issue reaching their subscribers' doorsteps. (In so doing, they would always show better numbers than subscribers could expect.) But as you know, we have never bought at the exact same price as any of our readers... we traded at SOME point on the next day, just like anyone else rightly or wrongly mirroring the portfolio. Stocks fluctuate hour to hour, sometimes minute by minute, so that no one was ever guaranteed the exact price that we got, or that someone else got. (In many cases, readers got BETTER prices than we did -- long-time readers will remember our fiasco in cashing out the Bed Bath & Beyond short last year.)

The point of our Foolish endeavors is to teach YOU to invest for YOURSELF; mirroring our returns is still easy to do with accuracy (again, you may do better), but we're not going to be pedantic about this. We don't think you should be, either... as usual, you should be making your own decisions.

Fool on!

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