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Rule Breaker Portfolio

<THE RULE BREAKER PORTFOLIO>

Improve the Exchange!
Better markets = better investing = better world

by David Gardner

ALEXANDRIA, VA (April 7, 1999) -- The Rule Breaker Portfolio got harmed today, as our top stocks gave back some of their steep recent gains. The BreakerPort got broken to the tune of 3.84%, versus a declining Nasdaq (off 0.73%) and a rising S&P 500 (up 0.68%). For the year, we're up 67%. We take comfort in the fact that we are beating just about any mutual fund we can think of -- that's the purpose of our efforts.

Which reminds me to restate why we do what we do, here. The Motley Fool approach to investing has always begun with the S&P 500 index fund. You can beat the rest of the mutual fund industry, consistently and cheaply, with that. Any additional time you spend as an investor should therefore be in pursuit of beating the index fund, beating the market averages. If you're maintaining an investment portfolio of 25 stocks and jumping in and out on a regular basis, we'll tell you that you better be beating the market indices, otherwise you're wasting your time.

Each of our portfolios here in the Hall of Portfolios is aiming to beat the market. Not all have, and over any given period, not all will. However, that is their goal, and the managers are doing their darnedest to beat the index fund. They have to because for no effort at all, they could've just bought the index fund.

That is the simple, logical approach that the Fool has brought to the world of investing. We threw out the managed fund industry, tossed brokers aside, got you focused on making your own decisions, and taught that any efforts beyond the index fund should all be totally tailored to trying to figure out what you can own that'll help you beat the stock market over the long term.

Every night, we compare our portfolios to the market averages (the S&P 500 is the industry benchmark) over the past day, month, year, and history, for this reason. We are focused on education (showing you how), amusement (because this stuff is both fun and funny), and enrichment (beat the market, beat the market, beat the market), and we always will be.

Changing gears, on Friday I'll be joining the New York Stock Exchange's Individual Investor Advisory Committee. What this essentially means is that I've been asked by the NYSE to serve as your advocate.

NYSE chairman and CEO Dick Grasso uses the phrase "backbone of our industry" to refer to you and me -- individual investors. Obviously, we are all participating in and witnessing a sea change in the public markets, as participation and -- by extension -- power shifts from the hands of institutions to individuals. We at The Motley Fool believe this to be a very, very good thing, as "participatory" markets are as good as participatory democracy -- the power spreads out, and more people are made owners. The more that individuals take responsibility for their money, think about it, study it, and know it, the better they will invest and -- the direct result -- the stronger our society will be.

Let me spell that out in plain terms.

When you or I invest in a crummy business (let's go with Boston Market), we are "misallocating" capital. We are taking a small part of our nation's savings base -- that portion which is simply our own -- and wasting it. "Wasting?" Yes, because the money winds up in the hands of a business that will, at best, invest it to obtain a sub-standard return and, at worst, invest it in something that will expire, valueless.

This is a reason that The Motley Fool has been anti-penny stocks from the get-go. But not just that. We're anti-bad business.

If through education we can enable the "re-allocation" of capital toward good business -- good people and the products they make -- that money will be invested by those businesses to create better products, better distribution, more efficiency, higher returns. I hope this doesn't sound too high-minded; it's really incredibly straightforward and simple. The efficient allocation of capital -- better investing -- leads directly to a better world and a better standard of living for us all. This is exactly what The Motley Fool and the New York Stock Exchange -- among many others -- are trying to achieve.

To return to my original request, then -- is there a way you feel the NYSE could be improved? Please share your thoughts with our community by clicking right now into the Rule Breaker Portfolio message board. Alternatively, you're welcome to e-mail me directly at DavidG@fool.com. I will take any good suggestions to our meeting Friday and present them to the committee. And get back to you!

Fool on!

-- David Gardner, April 7, 1999

What's up with Harry Jones today?

04/07/99 Close
Stock  Change    Bid 
---------------- 
AMZN  -7 3/8  175.50
AMGN  -2 15/16 77.06
AOL   -10 3/4 156.25
ATHM  +3 11/16 165.81
DJT   -  1/4    3.75
CHV   +  1/4   89.81
CAT   +  1/8   48.50
DD    +  1/4   58.50
GT    +  3/16  51.50
IOM   -  1/16   5.00
SBUX  +  1/4   31.00
TDFX  +  5/16   15.06
EBAY  -2      150.00

 
                   Day   Month    Year  History  Annualized 
      R-BREAKER  -3.84%   4.92%  66.76% 1573.78%   82.81%
        S&P:     +0.68%   3.15%   8.26%  203.02%   26.79%
        NASDAQ:  -0.73%   3.36%  16.04%  253.30%   31.03%

    Rec'd    #  Security     In At       Now      Change
   8/5/94  2200 AmOnline       0.91    156.25   17092.06%
   9/9/97  1320 Amazon.com     6.58    175.50    2567.48%
  5/17/95  1960 Iomega Cor     1.28      5.00     290.50%
  12/4/98   450 @Home Corp    56.08    165.81     195.67%
 12/16/98   580 Amgen         42.88     77.06      79.74%
  4/30/97 -1170*Trump*         8.47      3.75      55.72%
  2/26/99   300 eBay         100.53    150.00      49.21%
  2/23/99   180 Chevron       79.17     89.81      13.44%
   7/2/98   470 Starbucks     27.95     31.00      10.89%
  2/23/99   290 Goodyear T    48.72     51.50       5.72%
  2/23/99   300 Caterpilla    46.96     48.50       3.27%
  2/20/98   260 DuPont        58.84     58.50      -0.58%
   1/8/98   425 3Dfx          25.67     15.06     -41.32%

    Rec'd    #  Security     In At     Value      Change
   8/5/94  2200 AmOnline    1999.47 343750.00  $341750.53
   9/9/97  1320 Amazon.com  8684.60 231660.00  $222975.40
  12/4/98   450 @Home Corp 25236.13  74615.63   $49379.50
 12/16/98   580 Amgen      24867.50  44696.25   $19828.75
  2/26/99   300 eBay       30158.00  45000.00   $14842.00
  5/17/95  1960 Iomega Cor  2509.60   9800.00    $7290.40
  4/30/97 -1170*Trump*     -9908.50  -4387.50    $5521.00
  2/23/99   180 Chevron    14250.50  16166.25    $1915.75
   7/2/98   470 Starbucks  13138.63  14570.00    $1431.38
  2/23/99   290 Goodyear T 14127.38  14935.00     $807.63
  2/23/99   300 Caterpilla 14089.25  14550.00     $460.75
  2/20/98   260 DuPont     15299.43  15210.00     -$89.43
   1/8/98   425 3Dfx       10908.63   6401.56   -$4507.06

                              CASH   $9924.87
                             TOTAL $836892.06
Note: The Rule Breaker Portfolio was launched on August 5, 1994, with $50,000. Additional cash is never added, all transactions are shared and explained publicly before being made, and returns are compared daily to the S&P 500 (including dividends in the yearly, historic and annualized returns). For a history of all transactions, please click here.

</THE RULE BREAKER PORTFOLIO>

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