In this long-anticipated, groundbreaking guide to building a portfolio, acclaimed stock pickers and Internet pioneers David and Tom Gardner lay bare the simple philosophy that they have used to help millions of grateful individual investors outfox the professionals on Wall Street.
The research, the stories, and the results that underpin this book stem from the revolutionary and wildly successful "Motley Fool Million Dollar Portfolio"" — a one-of-a-kind Web experiment in which individual investors follow along as Motley Fool co-founder Tom Gardner invests and manages $1 million of The Motley Fool's own money.
In page after page of sound, sensible investment advice, readers are offered a rare glimpse into the inner workings of The Motley Fool machine — and offered a first-class education in building, growing, and defending an individual portfolio, one investment strategy at a time. From learning to think like an investor to finding a first stock, from dividend investing to blue-chip bargains to small-cap treasures, from international investing to community-based online tools that are revolutionizing stock selection and asset allocation, this book takes the reader through the essential strategies for building any portfolio — no matter how small its start or how big its ambitions.
Americans make three primary investment mistakes.
A startlingly large portion of our populace stands on the market's sidelines forever, missing out on the greatest builder of wealth available to the average (law-abiding) citizen. Many Americans just never save — or invest — anything. This is the greatest mistake of all. No matter your age, the best time to start investing is now.
The second biggest investment mistake is waiting too long to start. It turns out that financial independence can't be achieved as quickly as everything else in our lives: 90 seconds in the microwave oven, one-click buying on a Web site, or speed dial on our mobile phone.
The third biggest investment mistake is the subject of this book. People with this affliction might have money put away and may have purchased some mutual funds and even a few stocks. They've recognized the value of getting started, allowing the returns to compound over time. They make us proud. But they often have one tragic flaw: They are wildly unsuccessful pickers of stocks.
Picking good stocks
Investors often pick the wrong stocks and build the wrong kind of portfolio. They lack any coherent strategy. When the stocks they buy inevitably drop — at least temporarily — these folks cash out their shares and take a loss, running from the market altogether. Or they invest in bad stocks and stay with them for too long, "just hoping to get back to even." These strategies combine the damaging elements of desperation, blind optimism, and greed.
But even the most comically inept investor is in a far better situation than the non-investor or the late-comer. Because while the first two groups need to undergo a near-religious conversion before they see the light, a bad investor just needs a bit of strategy and guidance to accompany an existing practice and passion. This stuff is eminently teachable. It's what this book is for.
Think about how hard it is for many of us to get past those first two mistakes. The odds are stacked against an early start at successful investing. Most Americans begin their professional careers saddled with credit card debt and student loans while trying to pay for all that life entails, often on a relatively small starting wage. There's not a lot of cash floating around.
And even in the unlikely event that their couch cushions were overflowing with $20 bills, most people wouldn't know how to properly put the found money to the best possible use. Our high schools and universities have failed miserably to educate their students about how or why to invest. For the most part, no one has stressed the importance of saving and the value of investing, so they wander relatively blindly (or at least shortsightedly).
These are thorny, sometimes seemingly insurmountable issues and we by no means intend to belittle or gloss over them. In fact, previous Motley Fool books and countless Fool.com articles have provided advice and step-by-step guidance on how to work through them. That's our mission.
Once you're ready, we're here to inspire you to not only invest, but to invest well. There are two components to investing well: First, you have to choose the right stocks and second, you need a strategy for putting those stocks together in a smart, balanced way. This book shows you how to do both.
Before we get to that, though, there's one principle you must embrace.
No one's perfect
In order to succeed, you must first accept that you will fail. Great investors pick stocks that lose to the market at least one time out of five. It's a lot like basketball free throws — Michael Jordan, arguably the game's greatest player of all time, shot just a bit over 80% from the line over his...
Their panache is a cover for a belief in the old-fashioned virtues of patience, simplicity, and prudence.'
Brothers David Gardner & Tom Gardner co-founded The Motley Fool, a multimedia investment advisory company dedicated to building the world's greatest investment community, in 1993. They have co-authored four New York Times bestsellers, including The Motley Fool Investment Guide, The Motley Fool You Have More Than You Think, and The Motley Fool's Rule Breakers, Rule Makers. Tireless advocates for the individual investor, the Gardners also oversee the award-winning personal finance and investment Web site Fool.com (attracting millions of visitors each month); a nationally syndicated newspaper column, carried by more than two hundred newspapers; and a broad suite of highly-regarded investment newsletter services.
