<THE RULE MAKER PORTFOLIO>

Less is More
Sleeping to beat the market

By Tom Gardner

ALEXANDRIA, VA (March 24, 1999) --

"With time and patience,
the mulberry leaf becomes a silk gown."
   --Chinese proverb

The Rule Maker Portfolio closed the day higher, but trailed the S&P 500 by a quarter percent for the session. Now, thirteen months after the launch of this real-money portfolio, we have lazily wound our way into 38% gains. Over that period, the S&P is up 28%. We are, thus, ten percentage points ahead of the market's average return -- without trading, without paying ongoing management fees, without fretting.

Newcomers might ask, "Then what have you been up to?"

Well, mostly sitting, learning, whistling, reading, smiling.

It turns out -- as many of you and we expected -- that as is so often true throughout the business world, great success travels with great preparation. By making the model strong at entry, by building an intelligent game plan before playing, a Fool might even earn more reward for less work. Time might just become an ally. Patience might be a friend. And, outperformance might well be nothing at all extraordinary.

Now, I know how contrary that message sounds. After all, many of us were instilled with a belief that hard work would inevitably yield the richer reward. Blood, sweat, tears. In fact, professional investors often preach that, in order to win, investors must be on top of the market, day after day. With commissions as their guide, they're certainly not wrong.

But it's clear enough to me that, for individual investors, working smart is far more valuable than working hard. Being able to boil down hundreds of variables to ten critical ones, then being able to find companies that meet those criteria, then following the performance of these companies against the criteria, from one quarter to the next, this is so much more important for Fools than is trying to anticipate the next great trade, an hour or fifteen minutes hence.

The beauty of expert individual investing is that most all of the work comes up front, leaving Fools with rich intellectual and monetary rewards, as days fall into months, and months slip into years.

Don't get me wrong. I wish good fortune to every active trader on the planet today. These folks will keep our Uncle Sam happy for us, while we compound tax-deferred growth on our savings money. Amen to them. Trade on! Of course, the managers of this portfolio will continue to do just the opposite. We will stay committed to learning more every day about business, about the markets, about our world -- yet we will not try to get thrills by leaping in and out of stocks on the hour, shouting "Buy!" then "Hold!" and feeling proud that we have worked so HARD at it.

Sometimes I wonder what life would be like if every American investor or potential investor knew that when dealing in stocks, less is usually more. Less "effort" yields more reward. More scholarship leads to less trading activity. Less impatience brings more compounded growth.

Flip it and you have Wall Street's business model.

'Nuff said for today.

Tom Gardner, Fool

03/24/99 Close

Stock  Change    Bid
AXP   -4 3/16  117.13
CHV   -1 7/8   85.50
CSCO  +4 1/8   104.44
KO    -  1/2   65.38
GPS   -2       63.00
EK    -  1/2   65.13
XON   -1 13/16 70.94
GM    +  1/16  85.63
INTC  +4 11/16 119.25
MSFT  +4 11/16 171.25
PFE   -1 1/8   138.13
SGP   -1 3/8   55.31
TROW  -  3/16  33.50
YHOO  +5       160.50

                   Day   Month    Year  History
        R-MAKER  +0.21%   4.56%   9.00%  37.92%
        S&P:     +0.51%   2.44%   3.52%  28.11%
        NASDAQ:  +1.83%   3.38%   7.87%  43.10%

Rule Maker Stocks

    Rec'd    #  Security     In At       Now    Change
    2/3/98   24 Microsoft     78.27    171.25   118.80%
    5/1/98   55 Gap Inc.      34.37     63.00    83.30%
   6/23/98   34 Cisco Syst    58.41    104.44    78.80%
    2/3/98   22 Pfizer        82.30    138.13    67.83%
   2/13/98   22 Intel         84.67    119.25    40.83%
   2/17/99   16 Yahoo Inc.   126.31    160.50    27.07%
   8/21/98   44 Schering-P    47.99     55.31    15.25%
   5/26/98   18 AmExpress    104.07    117.13    12.55%
    2/6/98   56 T. Rowe Pr    33.67     33.50    -0.51%
   2/27/98   27 Coca-Cola     69.11     65.38    -5.40%

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   17 General Mo    72.41     85.63    18.26%
   3/12/98   20 Exxon         64.34     70.94    10.26%
   3/12/98   20 Eastman Ko    63.15     65.13     3.13%
   3/12/98   15 Chevron       83.34     85.50     2.59%

Rule Maker Stocks

    Rec'd    #  Security     In At     Value    Change
    2/3/98   24 Microsoft   1878.45   4110.00  $2231.55
    5/1/98   55 Gap Inc.    1890.33   3465.00  $1574.67
   6/23/98   34 Cisco Syst  1985.95   3550.88  $1564.93
    2/3/98   22 Pfizer      1810.58   3038.75  $1228.17
   2/13/98   22 Intel       1862.83   2623.50   $760.67
   2/17/99   16 Yahoo Inc.  2020.95   2568.00   $547.05
   8/21/98   44 Schering-P   2111.7   2433.75   $322.05
   5/26/98   18 AmExpress   1873.20   2108.25   $235.05
    2/6/98   56 T. Rowe Pr  1885.70   1876.00    -$9.70
   2/27/98   27 Coca-Cola   1865.89   1765.13  -$100.77

Foolish Four Stocks

    Rec'd    #  Security     In At     Value    Change
   3/12/98   17 General Mo  1230.89   1455.63   $224.74
   3/12/98   20 Exxon       1286.70   1418.75   $132.05
   3/12/98   20 Eastman Ko  1262.95   1302.50    $39.55
   3/12/98   15 Chevron     1250.14   1282.50    $32.36

                              CASH    $185.03
                             TOTAL  $33183.66

Note: The Rule Maker Portfolio began with $20,000 on February 2, 1998, and it adds $2,000 in cash (which is soon invested in stocks) every six months.

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