Mar 23, 2000 at 12:00AM
"With time and patience,
the mulberry leaf becomes a silk gown."
The Rule Maker Portfolio closed the day 2.80% higher, more than a full percentage point ahead of the S&P 500 for the session. Now, 25 months after the launch of this real-money portfolio, we have lazily wound our way into 99% gains. Over that period, the S&P is up 56%. We are, thus, 43 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
Fed up with Wall Street's notion that everyday people couldn't comprehend the stock market, Tom Gardner co-founded The Motley Fool in 1993 with a simple obsession: "To help the world invest, better."
- Mar 23, 2000 at 12:00AM