Anyone who has listened to David Gardner's podcasts for long will realize he's something of an optimist -- or perhaps a statistical realist. So if you ask him what's coming down the pick or Wall Street, expect an upbeat answer, every year.
Similarly, if you ask him why investors do what they do, and why Foolish investors specifically do what they do, he's going to come back to the same themes over and over. But some ideas are evergreen for a reason, so if you haven't heard it before or if it's been a while, this "Why We Invest" segment of the Rule Breaker Investing podcast is for you.
A full transcript follows the video.
This video was recorded on Dec. 27, 2017.
David Gardner: All right. Well, as I do every year this time of year, I'm going to close with my brief essay, "Why We Invest," but before I do that, a thought or two about the stock market. I'm going to predict ahead of time -- I hope you know where I'm headed with this -- the market goes up next year. And I see a smile from Rick Engdahl, my producer, through the glass, because he knows that that's always the right bet and I'm right two years out of every three, so I'm well ahead of most of the market timers who aren't much better than 50%. So I'm going to say the market goes up next year, and I reserve the right to be wrong.
However, one thing that I will say, and I hope this is helpful, is I'm almost certain the market will not nearly be as good next year as it has been this year, and I think we have to pinch ourselves. If you listen to me reviewing last week the five stocks we put under the tree a year ago -- and they were some of the biggest, best companies that I can think of -- every single one of those five, Amazon, Apple, Activision, Facebook, Netflix, was up more than 50% this year, and those were already megacap companies in many cases. So the chances of anything like that happening again, in 2018, I would say are nearly zero.
It doesn't mean that I'm a bear. It doesn't mean that I think the market's going down. You already heard I think the market's going up next year. But I want to make sure that you're disabusing yourself of the mentality that we're all kind of owed this ongoing prosperity. It will be all the cryptocurrencies that will keep going up. And all of your stocks. Even your biggest ones will go up another 20%-30%. I hope so, but I would guess no chance will those five companies go up 50%-plus in 2018.
So if that's helpful for you to reset your mentality at a time where maybe not enough of us, too many humans look in their rearview mirror and make decisions looking backward, I want you to start looking forward and recognize it's going to be a very different year in 2018, and I'm looking forward to it.
Before I present "Why We Invest," I want to mention next week's podcast to kick off 2018. It's going to be "Campfire Stories, Vol. III." We've done this twice before, about once a year on this podcast. Next week I'm going to be featuring listener and member stories, so if you enjoyed some of the voices you heard last week when I welcomed in my three Foolish analysts, you're going to hear from some of your fellow listeners.
If you have a good story -- if people tell you around the fire, Christmastime, that you're a great storyteller, and you have a great story about an investment, or a business you started that's not too long a story -- I'd love to think of featuring you on next week's "Campfire Stories, Vol. III" show. Drop us an email. RBI@Fool.com.
All right, so to close, "Why We Invest." I first wrote this, I know, seven years ago this month in 2010, December.
Why We Invest
My favorite episode of my favorite miniseries, Band of Brothers, is entitled "Why We Fight." Without wishing to spoil the story for those who haven't yet seen it -- do such people exist? -- I won't give away the answer to the question, but the episode is a beautiful, sad, and gripping piece of Hollywood poetry, and the phrase "why we fight" has since stuck with me. And it's begun to morph into my own phrase -- my brief reflection this month -- why we invest.
Let's peel every layer of the onion away at the start. At the root of the fruit is this simple reality: We work hard in this world to build up savings. That savings we call capital. Our capital represents the sum total of our life's efforts, expressed monetarily above and beyond what we've spent.
When we invest, we're doing something very wonderful and very difficult. We are forfeiting the enjoyment of the use of this capital in the near term. All our instincts and temptations, many of our peers, perhaps even a spouse, urge us directly or subtly by association against this. "Spend it now," reads, or sings, or shouts any one of thousands of messages confronting the typical adult every day. But investors take at least some of their capital and do the exact opposite. We forgo the instant gratification.
That, on its own, is admirable, but we go one further. We investors -- we crazy investors -- forfeit the enjoyable, immediate use of our capital for no certain reward. As stock market investors in particular, we invest willingly knowing that our unspent and unenjoyed capital may actually, at least partly, disappear. If there's a better reason for us calling ourselves Fools, I don't know that the world will ever find it.
In particular, practicing my own unique style of investing -- you've got to know it here on Rule Breaker Investing, the podcast -- as a more aggressive investor seeking to maximize my returns, I flat-out know that I will lose money on many occasions. Throw in the academic studies that say investing in individual stocks isn't worthwhile, because you can't reliably beat the indices, and now you can see why do-it-yourself equity investing is a niche. It's a niche we've been helping to grow at The Motley Fool, but it's a niche.
Here's why we invest -- for our children and grandchildren -- because our parents and grandparents did, and made our lives so much better. Because every dollar we invest helps support the companies and businesses we admire and buy from. Because we love and celebrate ownership and believe this world would be far stronger for more owners, not more renters. Because the academics are wrong. Because with Arthur O'Shaughnessy and his ode, "We are the music makers, and we are the dreamers of dreams," and investing is our instrument, and making dreams come true -- sorry, Disney! -- is a very real Motley Fool end. I see it happen with amazing testimonials, bull market or no, every day on our discussion boards.
Oh, and have I forgotten? I should throw something in here about achieving financial independence, too, so that you and yours can be self-determined -- not income-determined or government-determined -- and a hundred other reasons besides. These are all, in part or in whole, why we invest. Keep at it, dear Fool!
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Gardner owns shares of Activision Blizzard, Amazon, Apple, Facebook, Netflix, and Walt Disney. The Motley Fool owns shares of and recommends Activision Blizzard, Amazon, Apple, Facebook, Netflix, and Walt Disney. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.