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9 "Self-Evident" Foolish Truths, No. 5: Be an Investor, Not a Trader

By Motley Fool Staff - Oct 30, 2017 at 7:08PM

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And buy stock in companies you’re ready to "wear the jersey” for.

This week is the 120th Rule Breakers podcast, and as Motley Fool co-founder David Gardner looked back, he realized he's covered a whole lot of subjects in those shows. More to the point, with all those episodes behind him, there are some areas he may not have covered in detail in a while. So he's getting back to basics with a set of ideas he thinks any Foolish investor ought to take for granted -- because he's not taking it for granted that everyone knows them.

In this segment, he talks about why you'll almost never hear him use the redundant phrase "long-term investing" -- and how different investing is from trading.

A full transcript follows the video.

This video was recorded on Oct. 11, 2017.

David Gardner: No. 5: The now much-hyped point No. 5 where I talked about how I was going to mention the word "investor." It's really not that remarkable a point, but it does introduce what I've called in the past my "dead arm initiative." Here it is.

You have permission to give me a dead arm -- if you're near me at an event or around Fool HQ -- if we ever meet and you ever hear me use this phrase [and please don't dead arm me now because I'm actually just demonstrating] "long-term investor." Or "long-term investing." You are allowed to give me a dead arm if you ever hear me say that because, as I was saying on Patrick O'Shaughnessy's podcast Invest Like the Best when I did it last month [which was so much fun], I've made this point many times over the years.

Investing, by its very nature, is long term. So, when you are saying that phrase that I won't use now, it's a tautology. It's a redundant restatement. And it even confuses some people, I think, because they think that there's other forms of investing beyond the long term, and there's not. The opposite of investing is trading. Trading, by its nature, is done short term.

There are two players in the market from my viewpoint. They are investors and traders. You know which one this podcast is about. I'm not here to denigrate trading. It can be fun for some people. It's a pastime for others. Some people do it very seriously, full-time, and they get paid a lot of money as traders on floors: bond traders, futures traders.

But for you and for me, anyway, if you're like me, you're a lazy bum who wants to do other things beyond staring at wiggles and waggles on charts, or looking at CNBC, or following the market all day, every day. I think there are just too many more interesting things in life, and so the good news is you, fellow Fool, can with me be an Investor.

The Latin root for the word invest is "investire. " That means to put on the clothes of. To wear the clothes of. In my mental image, if you're a sports fan [I hope you'll get this] [and] you invest, you put on the jersey of your hometown team. You go to the stadium and you cheer them on. You love your team. You should love the companies you're invested in; the consciously capitalistic, I hope, enterprises that you're invested in doing good things in this world. Purpose driven. Managing for the long term. Resilient. Maybe with optionality, but you keep that hometown jersey on.

I was at the Vanderbilt-Kansas State football game a few weeks ago [visiting one of my kids at Vanderbilt] and I was reminded once again in an SEC football environment, for those who've been there, just how many people are wearing the shirt. It's not just true of college football, although very prominently this time of year it is. It's also true of soccer, hockey, and baseball. The list goes on. People wear the jerseys. Why don't we do that with our money?

Well, good news. Investors do. I hope you do. Rule Breaker Investing does. We put on the jerseys and we keep them on, even if sometimes we have a bad game or even a bad year. Again, your team is not always going to win every year, but if you've found a great team, stick with them. My baseball team, the Minnesota Twins, just got knocked out of the playoffs last week by the New York Yankees. The Yankees have made the playoffs 19 of the last 23 years.

[While appearing a little while ago on the WFAN show the FAN ], Mike Francesa's show in New York City, I said, "Mike, that is a buy and hold. The Yankees are a great example for all of their fans of exactly how to treat your money and invest in the stock market. And Mike gets it because he's an investor.

So, now you know the Latin root, now you know what you're doing, and now you know the dead arm challenge, the dead arm initiative. You may dead arm me if you ever hear me say -- you know what I'm not going to say.

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