On this episode of the Rule Breaker Investing podcast, we brought on a panel of Fools to help you, your friends, and your family get started investing. Today the panel (plus one!) is back to complete the series, to answer your questions, and to make sure you now have all you need to take that crucial step toward financial freedom!

A full transcript follows the video.

This video was recorded on Nov. 7, 2018.

David Gardner: Have you gotten started investing? Have you made a lifelong commitment, first, to save money?

And then with that money saved, have you made a lifelong commitment to find great companies and great funds that will let your money do what money does when invested well and left alone, which is that money invested well and left to its own devices makes more money? It's kind of like a rabbit.

Have you gotten started investing?

Well, one month ago we kicked off the first in a two-part series called "Get Started Investing!" I brought in a talented team of contributors. We gave you the specific steps that you can and must take -- and it's not complicated and there weren't a lot of steps -- to empower you to get started investing. And we've heard back from you in emails and on Twitter that many of our listeners who were not previously invested have, in fact, gotten started investing.

But we said a month ago we want to hear back from you. We can't have covered everything. We can't have nailed it in every case. Let us know your questions. Share your stories. How can we help?

And that's exactly why we made this a two-part series, because Part 2 of "Get Started Investing!" is driven 100% by your questions and stories, enabling us to round out this series with the responsiveness that we hope you've come to expect from The Motley Fool.

So my talented team is back with one new sidekick added, and we have your questions and thoughts, and this week on Rule Breaker Investing, it's "Get Start Investing! (Part 2/2)"

[...] And welcome back to Rule Breaker Investing. I'm David Gardner.

So glad you're here with us to start November and to start it right, by closing out our series on "Getting Started Investing!" And I'm really happy to introduce a new friend. Well, it's not a new friend of mine. I've known Rob Kralj for -- I don't know -- how many years, Rob?

Robert Kralj: At least five now.

Gardner: At least five now. I think we got to know each other best maybe on the Activision Blizzard discussion board at Fool.com.

Kralj: Yes. It was the lucky break for me catching the attention of the Fool, because it was a subject that I could actually speak to.

Gardner: You and I are both lifetime video gamers and investors in that company, but in the meantime I want to ask Rob a little bit about his background. I want to mention Rob is from Canada and he's coming through the Fool because we have our annual off-site here at The Motley Fool, Foolapalooza, and Rob was invited this year. And as soon as I heard that, I was like, "Rob, you've got to come join us for this 'Get Started Investing!' podcast because, as we're about to hear, part of what you do every day is help people in Fool Canada get started investing." But I want to start, Rob, by asking, "Rob Kralj, where do you come from?"

Kralj: Well, I'm Vancouver born and bred. Spent my early professional career basically running printing presses, so I come from a blue-collar background. I always like to tell folks when I deal with them in exchanges sharing experiences about investing -- here's an old reference, but somebody old enough will recognize it anyway -- to think of the Rodney Dangerfield regular-guy look from Easy Money. Basically that's what I bring to the table when I'm talking about investing. I'm not an analyst, but I've been reading analysts at the Fool for a lot of years, so that helped me fall in love with the whole experience of investing.

Gardner: Let me jump in there, Rob. How did you personally get started investing?

Kralj: As part of that job that I had in the first place. In my dad's day they had defined retirement pension plans, but by the time I was working, they had started putting us into mutual funds instead.

So we had a liaison. He did the old risk/reward analysis on me, decided where I should be, and they put me into that. And at about the seven-year mark into it I called him up and I asked for a little direct exchange. I said, "When I do the math, I see I have a 0% annualized return. Everything I've put in and my company has matched came out to a nice, even zero." I said, "What am I doing wrong? Should I be somewhere else?" There was some rustling, and it took a moment, and then came back, "No, no, everything looks right. It's just you've got to understand compounding takes time." I pointed out that compounding at zero, as far I understand, will take actually forever, so should I do something different? And again there was a little pause, and then I was told, "No, you're in the right place."

And so about seven years later again, in 2008, I got laid off, and at that point I had access to those funds. As a condition of employment there, I wasn't allowed to touch them. The Motley Fool has a nice plan where you are allowed to do what you want with your money, which is great. But there I wasn't, so I was stuck with it.

So one more time, when I got laid off, and I was going to be able to take it out, I did the math one more time. Now, to their credit, they must have gone up about 25%-30% before this had happened. There was a crash, so obviously everything pulled back, but I was right back to a nice, even 0% annualized return.

Gardner: So you kept saving all the way through, but it just never grew.

Kralj: No, and someone was making money. It just wasn't me. So fortunately at least what I put in and what the company had matched was still there. About three years before that had happened, I had serious doubts, so I started up with Stock Advisor, you guys. Actually I started with Hidden Gems before Stock Advisor. That was Bill Mann and Tom.

Gardner: Back in the day.

Kralj: Yeah, so that was my first bit of exposure, and us Canadians had it hard back then. We used to have to pay $30 a trade back in 2003 while Americans were paying $10, so first of all diversifying with a small amount of money. And I decided, "I'm going to test these guys out. I've read David and Tom's books. Very charming writers. They seem very likeable, but so were other people who had taken my money and my life in the past. They're usually quite charming." So I wasn't convinced yet, but I thought I'll try it with a small amount of money and see how it goes. And this is what I always tell members when I talk to them. Just start small. Don't feel like you've got to conquer the world all at once. So when I got laid off, I'd been doing this for about three years with the Fool, and I could only diversify about, I think, six companies wide because it's $30 a trade. That cost me almost $200 right there.

And doing the math, I realized that it's going to cost me that much to get out of those positions again, so that's quite a cost going in. Luckily, Buffalo Wild Wings was one of those picks, so I think it had done something crazy, like tripled for me in a hurry. Two others did OK. One of Tom's worst picks ever, Sleep Number, was in there, and I think I sold that one off at about...

Gardner: The mattress company. It went all the way down to like a penny but then came pretty much all the way back. It was an incredible time.

Kralj: I even did the old "test a mattress in the store" bit and did the boots-on-the-ground kind of research, and still I ended up dropping that one. But in the end, what I figured out was that three years in I was doing really well, so I started putting in $500 a month and decided, "You know what? I'll keep doing this."

So it was at the five-year mark that I got laid off at the other job, and at that point I tallied up how I'd performed with The Motley Fool picks, and I had doubled my money. I thought, "That's quite a bit better than the 0% I'd gotten at the other place," so I took out all that money, put it all into my brokerage account, and I waited until there was three consecutive months in 2009 where the market had started going back up. I decided, "OK, it's a good indicator that maybe this is over and we're going up."

Gardner: That timing was pretty good, Rob.

Kralj: Yeah, so that worked out well. And then basically I dollar-cost averaged the bulk of the money in over the next nine months and, well, that stuff's done pretty phenomenally.

Gardner: Thank you. I'm so glad to hear you share that part of your story. Thank you, Rob. It reminds us that really we can come from almost any kind of a background. As long as we start asking the right questions and seeking good answers, we can get started investing.

And Rob, I know in recent years you've been working for us and with us at Motley Fool Canada, and the reason I wanted you to join our merry band this week is because you spend a lot of time on the phone with members calling in, all of whom have investment questions, and I specifically want to ask you, is there a particular theme that you can highlight? Maybe one or two points or themes around the people that are calling who are starting investing. Maybe something you should do and something you shouldn't.

Kralj: Well, one sense I get when I actually get a chance to talk directly with folks is that a lot of people feel a lot of pressure that they've signed up for the service, so now they have to rush to get things going. They feel like they have to conquer the world all in one quick shot.

So one of the biggest things to try to reassure them is that the most valuable thing they're going to get out of this is the education. Even if you spend your first year just reading the content. You could do a mock portfolio or take a small amount of money and just start testing this.

I always emphasize something that we have, which is a bit of direct advice from you that's in our frequently asked questions section about diversifying 10 to 12 companies wide. I always tell people, "Even if you have a small amount of money, divide it up a bunch of ways..."

Gardner: Don't load it all up on one stock.

Kralj: Right, so that you can experience the whole up and down. You'll see some dropping, some going up, and it will give you a better sense. I mean, one really scary story was I had a fellow that called in, and to his credit he owned it. He owned his mistake.

But he told me that he had put down a large chunk of money. It was about $45,000, I think, on one pick that we made at Stock Advisor Canada, and that one happened to be down about 40%, so it wasn't one of our shining stars.

And when he said that to me, my first question to him was, "I hope that's a small amount of money for you personally." He said, "No, it's actually a really big chunk." And I said, "Well, it's very important." I re-emphasized diversifying, and this is why we say that. Especially with a small company, when our analysts emphasize it's a small company, that's going to be potentially volatile and to watch out for that.

He did own up to it. When it came back a bit, he actually got out. I think he helped himself out and he had a really positive attitude, so I've got a good feeling that he probably managed to do well afterwards, but it was a hard lesson early. That's, I think, one of the scarier things is that folks feel that to test it they want to buy just one stock or two to dip their toes in, where it would be better to buy 10 of them, but small amounts of them.

Gardner: Rob, that is awesome. Thank you. And that's a great way for us to start this episode where we're getting started investing. So you've just heard from Rob Kralj. Rob is our full-time employee at Motley Fool Canada, one of several in a small but growing set of services we have. We love our Canadian Fools.

We're also going to welcome back my friends David Kretzmann, Jason Moser, and Matt Trogdon, and we've all kind of cued up one or two questions that jumped out to us that we've heard from you in the last month, and that's where we're headed next. And we're going to go through these questions and we're going to do our best.

And team, this is my one bit of advice I said off the air to you. I'll say it on the air as well. While it's very natural when you see someone's question to think, "I want to answer that person's question really well," a problem with talk radio that I've experienced in the past, especially financial talk radio that I've done, is sometimes someone's question is so particular that it really doesn't speak to many other people.

So what we're going to try to do in our time together is we're going to take these questions and sometimes just use them as an opportunity, a springboard, to make an important point. Maybe sometimes a bigger point about getting started investing. And so David Kretzmann, you seem to be nodding your head vigorously. You seem aligned. And so for this reason I think you should kick us off. So David Kretzmann, what have you got?

David Kretzmann: I've got a question from Zack Hinek, and he asks, "When you're just getting started investing, how do you evaluate your winners from your losers? Should I only be evaluating my stocks every three years? And how do you know when to cut your losses with a bad stock? Thanks, Fools."

Well, Zack, that's a great question. I think you're thinking in the right terms here. I think it's always important to take a step back and remember that business success is measured in years. Great entrepreneurs and leaders like Jeff Bezos at Amazon or Mark Zuckerberg at Facebook aren't visionary founder/CEOs who are thinking in terms of where their business or stock price will be in a month or two. They're thinking in terms of the long term. In terms of not just years, but even decades. So when possible, always think in terms of years and not shorter time increments when you're measuring whether or not an investment or a company has been successful or not.

Gardner: David, what do you do yourself? I know you started investing -- you said a month ago on this show -- right around the age of 12. How were you scoring things back then, and has that changed?

Kretzmann: Anytime I buy a stock now, I'm aiming to hold it for at least three years, and that's not unique to me. That's something that we constantly espouse here at the Fool. I think anytime you buy a stock, if you're starting out, give yourself some timeline that you adhere to. I'd say for most people maybe start out with a year. The longer you can make that time horizon, the better, but start with something that seems achievable and not so distant that you don't think you'll be able to adhere to it.

But think in terms of longer-term time increments. Numerous studies show, as I think we talked about last month on our first podcast, the longer you hold stocks, the better off you'll tend to be. So when in doubt, hold longer.

Then Zack also addresses the question of how you know when to cut your losses or when to sell a stock. I think it's a lot easier to know when to buy a stock, but I think we have a tougher time answering when exactly to sell a stock. But a couple of reasons I'd throw out there.

No. 1, if you don't believe in the company anymore. If you're not excited about the company. If you think, taking a step back, that this company doesn't have a good chance of being an outperforming business or stock over the long term, maybe you want to part ways with it.

And then, No. 2, depending on your circumstances or your life situation, if you have limited capital to invest and you see better places for your money than a given stock, maybe that's a time to nudge closer to selling.

But in general I'd say you want to err on the side of holding, not looking to rush and sell companies. We have to remember that even good businesses can be underperforming stocks over months or even a year or two. David, I know you've talked a lot about your history with Amazon, or Netflix, or any of these great companies and phenomenal long-term investments. These companies will have periods where their share prices are down 50% or more in a period of months or years. But if you find a great business and you hold over a multi-year period or ideally decades, you'll tend to do pretty well if you have that diversified basket of great, individual companies.

Gardner: And Matt Trogdon, I'm thinking about you working on our Motley Fool Asset Management side of our business -- our sister company. I'm thinking about if the answer is different if we're talking about funds versus stocks here. Like, would you look at your fund? What's an appropriate amount of time to let a fund win or lose for you before you decide I should hold onto that or I should exit?

Matt Trogdon: I think it is probably different judging a fund versus judging a stock, but I do think that people have just as hard of a time judging if a stock is performing well as we do if a fund is performing well. The data will show that people will chase fund performance just as well as they'll chase stock performance.

What David brought up was a good point. I think when we get these types of questions, a lot of times folks are looking for a number. If this stock drops 20% should I get out? If this stock drops 30%...

Gardner: Do you ever notice how those are always round numbers, by the way? What is it about that? I don't know what that is.

Trogdon: But I think the answer is much more qualitative than it is quantitative. If you no longer believe that the company can do what you thought it could do when you first invested in it, then that would be a time. And that would be much more important than whether the stock price has dropped 20% or 22%, round number or not.

Kretzmann: And a common quote that will come up from Benjamin Graham, who is the mentor of Warren Buffett, is, in the short term the market is a voting machine, but in the long run it's a weighing machine. So in the short term, you're going to inevitably see that volatility. As I mentioned, even great businesses will see their share prices fluctuate a lot, and that's not necessarily reflective of the progress of the underlying business. So as Fools, we're always focusing on the long-term, ongoing progress of the underlying company and eventually the stock price will reflect the performance of that business for better or worse, and we hope for better more than not.

Gardner: Awesome. I want to say more, but I also want to get on to more questions. So Jason, what question have you brought to the table, here?

Jason Moser: This was one that actually hit a little bit close to home and I'll explain a little bit more once I read Aaron's question. The question is from Aaron Watterson. Aaron says, "Hi! I love the show." Thanks! "I'm newer to stock investing and can only allocate a certain amount of money into stocks, and since I can't add to my money in stocks, how do you recommend reallocating the money when you want to invest in a new stock?"

Aaron then goes on to mention, "I have subscriptions to Stock Advisor and Rule Breakers and love the information given; but feel uncertain as to when the best time is to buy. A lot of information is given as to what stocks to buy, in a general idea, but I feel uncertain if the current price of the stock is the correct price to buy. I've purchased a couple of recommendations only to have the price drop. I'm not sure if I'm missing some key information or if the idea of long-term investing is to just jump in and go for the ride."

So a few questions in there. And what I meant by hitting close to home. The service I used to work on, Million Dollar Portfolio, we dealt with this fixed-income problem. When you have a portfolio where you're not adding money to that portfolio regularly or at all, and many people actually do have that situation, then it requires a little bit more consideration as to how you're going to manage that portfolio in buying and selling. And I think it's fair to say that you probably will do less buying and selling, and hopefully more buying and less selling altogether.

What we found, oftentimes, when we wanted to reallocate money is we were doing one of two things -- either harvesting some gains from a winner, because we felt like there was an opportunity that existed where we thought that money could grow considerably more in another investment or perhaps there was a stock investment that hadn't worked out. David was mentioning maybe you don't have the conviction or perhaps it's just not a story that's ended up working out the way you hoped it would. It happens to us all and more often than we'd probably like to admit.

I think the key, though, is to understand that generally the way that we invest, we approach it with that three- to five-year time horizon. So when you make that purchase, you really do want to make that purchase with the idea that you're going to own that stock for at least three years. It may very well be that you're not going to be doing a lot of buying and selling and that can oftentimes be a good thing.

Now, in regard to the subscriptions, I feel compelled to mention that with Stock Advisor and Rule Breakers one of the greatest features of these two services, to my mind, is the Best Buys Now feature. When Aaron asks the question of what stocks to buy and what is the correct price, well, every month you're going to get 10 Best Buys Now from both services, so 10 from Stock Advisor and 10 from Rule Breakers, and those are the opportunities that the teams on those services recognize as the timeliest opportunities right now.

That means go ahead and buy them. They're giving you that green light to go ahead and buy at that price. If you see that price dip a little bit the next day, it's OK. David made mention of the voting machine versus the weighing machine, and that really is what that is all about. You'll see those prices fluctuate in the near term, but really it is more about that longer term, three- to five-year time horizon.

Gardner: Rob, I'm wondering. When you take calls for Fool Canada or answer an email, roughly what percentage of the people reaching out to you have, as Jason said, sort of a fixed situation? No more money coming in. Maybe at retirement or near retirement. Roughly what portion?

Kralj: Well, I get the sense, just dealing with so many members, that a lot of them are close to retirement age. I would imagine that would be the case for quite a number of people. And also to Jason's and David's points about the stock price right off the bat, it's one common thing that comes up at Member Services all the time.

I had somebody recently email us saying, "The last few months you guys aren't doing that well. You did great a few years ago, but now you're not doing that well." That speaks to exactly the point these guys are making. I actually emphasized to him, "Well, if you look at our first two years at Stock Advisor Canada, for instance, you'll see how well we've done."

And to offer him context, I said, "Back in those first two years we were trailing the market the entire time, so we didn't look good then, either, to people." But a lot of people don't understand that when our analysts are seeking out bargains, the bargain doesn't end being a bargain the day they recommend it. Sometimes it becomes an even better bargain in the coming months afterwards.

So I really try to emphasize the point that time is the whole key here. The reason those have done so well is now they've had the time to ferment, if you will, and turn out to be great investments. This could be the case with all the last ones, because the market's been pretty uneven for the last few months.

Gardner: Speaking of things that strike close to home, Jason, just on a total side note. About a year ago at this time, I believe your alma mater was playing men's basketball against mine. Wofford came into the University of North Carolina, Chapel Hill into the Dean Dome, and pulled off a stunning upset.

Moser: The unthinkable. Yes, the unthinkable.

Gardner: So you and I are taping this -- our whole team is taping this -- on Monday afternoon because we're doing it a couple of days early this week. So we don't know what will have happened at this point, but Tuesday night, sure enough, for those listening last night, but for you and me tomorrow night, we have a rematch.

Moser: Big game at Wofford, too. It's going to be a...

Gardner: It is at Wofford. Are you going to be there?

Moser: I'm not, but interestingly enough, I am going down to Wofford next Tuesday. I'm going to speak to some finance students down there on Wednesday about the work that we do, here, and whatnot...

Gardner: That is awesome.

Moser: ...and I am going to aim to go to the game on Tuesday evening there.

Gardner: Well, I definitely hope Wofford wins that one. It's the Terriers, right?

Moser: It's the Terriers, yeah.

Gardner: God love us. I hope the Terriers are on fire that night, but not tomorrow night/last night.

Moser: A tiny school, but it's a big event certainly for them. I saw a lot of video footage of students waiting to get those tickets for that game. It's going to be a big one.

Gardner: Well, it's great to hear that you're going back to Spartanburg, South Carolina, and helping people get started thinking about investing in businesses. Jason, good for you.

Moser: I'm excited. I'm excited to do it.

Gardner: All right, Matt Trogdon, what have you brought? What Q&A did you see from the pile that we want to speak to next?

Trogdon: I have two questions from Darren Littlewood, so thank you, Darren. He says, "Hi, David. I recently started a savings plan for the next 10 years." That's awesome. "I considered investing in equities before, but the idea of constantly analyzing charts did not appeal to me." That's OK, Darren. It doesn't appeal to me, either.

He says, "My plan is to allocate a percentage of my savings each month to the stock market and to build a small portfolio of companies that feel right to me." Then he goes on and says he's not going to be too concerned with financials at first. He wants to stick to sectors that he understands or at least companies whose visions he understands, and then he plans to add to companies that he thinks are showing growth and to hold off on companies that are flat or losing value. He says he understands this is a simple plan, and so he wanted to ask if it's a good plan.

You know, Darren, I might even try to simplify this plan further. I think simple is good. I wouldn't base my decision on whether to add to a particular company on whether it's growing or not -- whether its stock price is growing or not -- especially if analyzing financials is not something that appeals to you. I think if you're just starting out, I would try to build up a diverse group of stocks and companies that you know well and find interesting, and if you don't want to do that, then I would just look for a low-cost index fund and add money to that each month.

His second question is also interesting to me. He says, "Would there be any advantage in adding large sums every three months over small sums every month?" Darren, I would say I don't see an advantage here. I actually see a potential disadvantage and that is just because of how we are, how our brains work, and the importance, I think, in just developing habits.

So when you're just starting out investing, I think it's important to turn it into a habit, and I think you'll have a lot more luck doing that if you invest every month than if you hold off until every three months. I also worry that if you hold off until every three months that bigger pile of money will start to look appealing to you for other uses. You might find other things you want to spend it on.

I think if you make it a habit to invest every month, you'll have better luck doing it that way. And then to add a third point there, I would try to make it as automatic as possible. I would try to hook up your brokerage account to your bank account so that deposit comes in from your bank account every month automatically and you don't have to make that decision over and over again.

Gardner: Matt, I really like where you started with Darren, because I like simple and I like that you simplified that further. Darren, I don't think that you have to be a numbers junkie or somebody who feels very comfortable clicking around financial statements to get started investing. I hope that's very clear in this series that we produced starting last month and then with this one.

Truly just thinking about what are companies that you respect. I did hear you read, Matt, that Darren said he's looking for companies that lead to a better world. He said something he feels good about.

Trogdon: Companies whose visions he understands.

Gardner: Yes, so that's really great. Here's like a random smattering of four companies that I just think of as stocks but think about the products behind them. How about Boston Beer? Sam Adams. Sam Adams beer. I mean a lot of people, I think, could recognize Sam Adams beer. You could buy stock in that.

How about Mad Men, the television show? An outstanding show. I'm mired somewhere in like Season 3. I don't know if you guys have seen all the way through this one. Rob, have you ever watched Mad Men?

Kralj: I have not. I have a cousin who raves about it, but I have not gotten to watch it.

Gardner: There we go. AMC Networks is the public company behind Mad Men. And then let's go a different place -- Trex. How about outdoor decking? I mean, T-R-E-X. It's both the company name and ticker symbol. I think a lot of people haven't heard of that one. But for those of us who have, we recognize this is a very innovative outdoor decking company. Making stuff that looks like wood but does a lot better against the rain and the elements. So that's been a tremendous winner. A smaller company.

And then, again, to close my little random list of four companies that we can all admire is Wayfair. There's a company that is kind of like Amazon but they're selling you furniture. They're really focused on furniture -- furniture sales online and e-commerce.

So there's just a nice smattering. You've got Sam Adams, Mad Men, Trex -- which many of us may have just heard about for the first time, and then Wayfair, which is a site that perhaps you've ordered something, Darren, from before. Or if you haven't taken a look, because that's one of our stocks and we want everybody to buy from it and do well with it.

So I think a lot of this is just about getting in touch with the companies that you like. You find out, "Oh, that's public. I didn't know Sam Adams was Boston Beer." You can become a part owner and, Matt, as you said, diversifying so you're not just loading it all up on one stock. That is such a big thing.

Trogdon: I agree. If you're starting out and you want to go toward the path of buying individual stocks, I think buying companies that you're interested in and that you understand and can follow is really the way to go.

Gardner: Next, Rob, I want to kick it to you. What Q&A do you bring here to the table?

Kralj: Well, I know that you like to pronounce names properly, and so I...

Gardner: I try.

Kralj: Yeah, so I had to Google this one, and I didn't get a lot of help from Google, but I saw a suggestion that kind of made sense to me, so I'm going to try this. A question here from Pedee Ewing, spelled P-E-D-E-E. So I went with Pi-day. I'm hoping today that that's all right, and that's at least close to correct.

Gardner: You gave your best shot, and that's all we can ever ask on this show.

Kralj: Pedee opens with, "Hello. I started listening on Oct. 25 and have been through the latest podcast episodes. I'm 27. The first in my family to start investing. I started investing this year with Robinhood, around $1,000. Can safely budget $100 a couple of times a month." It sounds like a good plan, and we touched on that already a little bit here and why that is. He mentions that steps 1 to 3 on the show are perfect and make total sense; however, being so new to investing, "I struggle with understanding the end goal. When do I know I've done a good job? How do I review my investing decisions? My previous naive notion was to buy low, sell high, and repeat, but hearing your wisdom in becoming a lifelong investor, how do I periodically assess that I'm on the right track? Also, when's an OK time to take my money out and profit?"

So David touched on some of this already as far as tracking how you're doing. One of the things that I've really made great use of is the Scorecard on the U.S. service sites. It allows you to track your performance against the S&P 500. It's where I find a lot of comfort with my own portfolio as I've just recently gone through a spell -- I own a lot of Rule Breakers and a lot of companies that David has recommended ...

Gardner: Yes, it's been a tough month or two for us, Rob.

Kralj: Yes, when you've commented on it recently, I've nodded, because I've been sharing that experience. I took about a 20% shaving off my entire portfolio in two weeks, so it was really huge.

And where I find comfort in that situation is I right away go look at how I'm tracking against the S&P. And what I saw was, sure enough, I have a very high-beta portfolio now, because once upon a time it was 50-50 blue chips and Rule Breakers, and after about a decade it is now about 70% Rule Breakers and 30% blue chips simply by virtue of the fact that those have grown way faster than my blue chips.

And I'm also one of those people who doesn't add money to the portfolio at this point. So I have to manage these things, and I've chosen not to do the trimming, so Netflix is now a very large portion of my retirement portfolio.

Gardner: When it sneezes, we all feel that.

Kralj: And it did. It dropped about $100 a share in a very quick period of time. So the first thing I do is I look at the scorecard and I see that yes, I dropped faster than the S&P 500, but I also keep in perspective that in the last two-and-a-half years I had dramatically outperformed the S&P. I'd already been bracing for and expecting this trim back for me -- that I'll get punished pretty well when the time comes for a trim back -- so that's always a good thing to watch, is how you perform against the S&P 500.

And by the way, it's great that Pedee is 27 years old and doing this, because he's starting way ahead of a lot of people, and the biggest advantage is, of course, time so they've already got that going for them.

And then with regard to the end goal. Well, the end goal for most people investing is financial freedom. Being able to retire earlier. In terms of when it's OK to take the money out, I always think of a little exchange my wife and I have. Whenever I tell her, "Hey, we had a great week this week. Netflix or whatever just jumped this much," her first cheeky remark is, "So can I go buy that purse today?" And I always have to emphasize to her that "No, this is the reason that wealthy people have money, is they don't immediately spend something the moment they make it."

Trogdon: How did that go?

Kralj: It went OK. She's still buying it right now. And I keep reassuring her that down the line we will enjoy this money a lot more but we first need that money to make more money with, so you've got to leave it in there.

Now, Pedee is starting so young -- like my older son, who I got started at 19 -- that there may come a time, maybe in their early 40s, where they realize, "Wow, I've got quite a bit saved up already," and it might be an adequate time, especially if you're inside of TFSA in Canada, the Tax-Free Savings Account...

Gardner: Tax-Free Savings Account.

Kralj: ...it's easier to pull out without consequences. So that might turn out to be a great option at some point in time.

If I was to start doing that, the first thing I would calculate is by doing a little game I like to play because I'm also a gamer. So I always like to extrapolate using a simple compound interest calculator. At the current rate that I've averaged for the last 15 years, where will the amount of money I have today put me at 65? I always play that game. So whatever that annualized return shows, that's the number I input always. And after this beating, it's a lower number. I put that in. That way I'm consistent in my evaluation.

So at some point when I want to take the money out, I would then subtract that money out of it, input the numbers of what I have left that figure, see where I'll be when I retire, and then I know if I can really afford to take some of that money out right now. So that might be an interesting strategy that's simple enough to do.

Gardner: Well, my hope for your wife is that at some point you're saying, "Yes, you'll get that purse."

Kralj: That is the dream. We will get to that point, yes. I mean, we're already at a point now where the portfolio's done so well that...

Gardner: You certainly could, probably, afford a purse.

Kralj: That's why I've stopped putting money in now. I've gotten to a point where I realize that if this continues and I know what I'm doing and it's right, then I'm going to have plenty when I get to retirement age and if I'm wrong, then why keep pouring good money after bad. I have no inclination to think that I am wrong, and it feels great going forward, but still that's why I'm already at that stage. Not quite pulling out money yet, but I stopped putting it in, and that's the first step.

Gardner: Rob, I really appreciate that perspective. The reason I'm delighted Rob got to join us this month is because he's spending time playing up his Rodney Dangerfield self. And why not? Because you're a better-looking guy, Rob. You and I know it, but regardless...

Kralj: Bless your heart. High praise.

Gardner: ...you really are, every day, talking to real people, there, at all different stages of life who have questions like the ones we're trying to tackle this week. So great job, and thank you Pedee Ewing, and thank you Rob Kralj. I'm going to bounce past it right back to David Kretzmann.

Now, I do want to make it clear. There are two Davids on this podcast, so occasionally we're hearing, "As David said earlier..." And if you're a new listener you might be confused as to what's going on. The intelligent things so far this week have been said by David Kretzmann...

Kretzmann: Oh, David, you're too kind!

Gardner: ...who is one of the Davids, and then there's the emcee, more of the Alex Trebek figure. The guy just lobbing stuff in from left field. But David, you've been killing it so far, and I want you to only up your game now. I passed the ball. Take another shot.

Kretzmann: Well, we've got another question, here, from Catherine Barrett. She says that she works full-time, but "I'm not currently able to log into my brokerage account when the markets are open. So far I've just been selecting which stock to buy the night before and setting it for a market order the next day. I know the price can change, and I get a warning message about this each time I do it, but I don't see any other option. It hasn't backfired on me yet, but I'm still new to this. Is this method too risky? Is there a smarter way to buy stocks for people whose jobs don't allow for buying during the day? Thanks again for sharing your wisdom and positivity."

It's a great question, Catherine, and there's probably other people who are in this boat where the market's only open 9:30 a.m. to 4:00 p.m. ET, most weekdays, and you might be working during that time and not able to log in.

The approach that Catherine mentioned where she's saying, "I'll buy this stock tomorrow, when the market opens," is a pretty good approach when you're talking about larger, more established companies. So if you're doing that approach with a company like Apple, Alphabet, or Disney, you're pretty safe doing that.

What we're talking about here is distinguishing between a couple of different ways that you can order or buy stocks. You have market orders, which is basically saying, "I'll buy this stock from the next person who sells it to me." Usually that's right around the most recently listed price of a stock when you look up the stock quote.

Gardner: So if it's during the market day, it's going to happen instantaneously. That's your market order it's going to fill, assuming it's a big, liquid company. And if it's at night, it will just be the very first second of the next morning.

Kretzmann: Yes. So for those bigger companies -- companies that are probably worth at least $10 billion or so -- you're probably going to be pretty safe because most of those companies will have hundreds of thousands, if not millions of shares changing hands each day. So the volume, or the liquidity, is really high.

But you also might want to look into limit orders, which is basically setting a price and you're saying, "I won't buy this stock at anywhere above this price." So if it's a $10 stock and you're comfortable paying anywhere up to, say, $10.50, the night before you could set a limit order for $10.50 and that will be the maximum price you pay for a stock.

You don't necessarily need to do that for those bigger companies out there, the Apples or the Disneys of the world, but if you're starting to deal with mid-caps or small-cap companies that are maybe $5 [billion to] $10 billion or less in market value, those companies won't be quite as liquid. There won't be as many shares changing hands, and the danger there is if you use a market order with one of those smaller companies, you could end up paying an arbitrarily higher price. Instead of paying $10 or $10.50 a share, you might pay $11.50 to someone who's all of a sudden especially happy that they were able to find someone to buy shares at that higher price.

So that's really the main distinction between market orders and limit orders. Usually it's not a huge deal if you do either one, but if you are looking at a smaller company, I would stick with the limit order.

Gardner: Really nice job of breaking that down, David. I would say if we did "Get Started Investing 101" a month ago with Part 1 of this series, that's "Get Started Investing 102," where we're starting to talk about the difference between one type of order when you're buying a stock and another one.

Obviously, we have a lot of resources at Fool.com. If you were just to Google, I'm making this up, but "motley fool limit order," I bet you're going to find one or more articles that talk about that. We have our "13 Steps to Investing Foolishly." Anybody can Google that and find a lot of Get Started Investing! material, info, and perspective from us. Some of us have contributed at writing some of those steps. So there are definitely a lot of resources at the 102 level that we're not going to be able to fully cover in this series, but they're all there on our website.

David, do you use limit orders these days?

Kretzmann: Usually I'll use a limit order just out of habit. It's not necessarily that I'm trying to pay a lower price for the stock than what's been most recently quoted, but I'll just set a limit order, let's say, like, 1% above where the current stock is. There's not really any rhythm or reason to that. Usually when I'm buying the stock, I want to buy it that day. I just don't want to pay an arbitrarily higher price, so I'll definitely do it with those smaller companies like I mentioned. But even with the bigger companies, just out of habit I'll set a limit order, usually just a few cents above where the stock recently was.

Gardner: Anybody else? Who else around the table goes limit or market?

Kralj: I do exactly what David does, actually, just to make sure that something crazy didn't happen in the next 15 minutes when I wasn't watching.

Moser: We always talk about how the market loves certainty and hates uncertainty. Well, as an investor I like certainty, as well, and I feel like a limit order can just give me a little bit more certainty.

Gardner: That's hilarious, and the only reason I'm laughing, and I haven't heard from Matt yet, is I haven't used a limit order for at least 20 years. I just go market order every time.

Kretzmann: How's that done for you, David?

Gardner: It's done fine. Well, I think you're being sarcastic in a nice way. You're suggesting that I've done well. I think we all have done well over the last 20 years, but really, I can't say that I've done necessarily well with the fills that I get on my buys and my sells.

I mean, I'm typically picking stocks that are liquid and well-known companies, and I'm only ever generally buying stocks that I recommend to all of our members. We try to go with stocks that you'd recognize and not put you in some bizarre contortion to find some company that only exists at a limit order a certain hour of a certain day in a certain country. We're trying to be as helpful as possible.

Anyway, I thought most of us were going to be market-order guys and David was going to be the oddball. But it turns out...

Trogdon: I'm with you. I'm a market order guy.

Gardner: OK, good.

Trogdon: Well, in theory we're hoping that you're going to be buying stocks that you're going to hold for five or 10 years. So if you get the stock at 10 1/4 versus 10 3/8, it doesn't really matter.

Gardner: I think we're all right. Just like there's no one better type of music between classical and rock. They're all great, and some people want to play classical, and some people want to rock.

Kralj: My reaction is just a fear of the rise of the machines, so I'm just making sure that nothing insane happens.

Kretzmann: Full control.

Gardner: Yes. Unless the machine itself, with its limit order, botches it or somehow starts to...

Kralj: Yes, I guess that could happen.

Gardner: ...get after you, even with your limit-order thinking. Anyway, that was a great job breaking that down, David.

The next one up -- we're getting near the end here. I think we have two left. Matt?

Trogdon: Sure. This one comes from Nathan Dewinkle from Lansing, Michigan. You know, I've never been to Michigan. I hear it's nice, though.

Gardner: East Lansing is where Michigan State University is.

Trogdon: That's right. Lansing's the capital.

Gardner: Lansing's the capital of the state.

Trogdon: Well, there you go.

Gardner: I feel like we've been there, Matt, together. We had a moment there.

Trogdon: That was it.

Gardner: I loved my visit to Lansing with you.

Trogdon: It was nice, wasn't it?

Gardner: Next time I hope to maybe see East Lansing, where Michigan State University is, and we could watch a basketball game...

Trogdon: Maybe we could.

Gardner: ...because I know you're a graduate of the University of Virginia, which is a perennial Top 10 basketball team these days for men. And Michigan State is pretty much up there with you guys.

Trogdon: That's right. Well, Nathan says, "David, hello. I am just getting into investing beyond my 401(k)," so I'm guessing he's been investing in a 401(k) for a while. "I've become a Rule Breakers and Stock Advisor member and am really enjoying it."

And he has a couple of questions. One of them I think I can handle on my own. The second one I would be interested to hear what the table has to say. The first one he says, "Is there a target portfolio and how should a portfolio be broken down by different sectors, or types of stocks, or investments?"

This is a great question. I really like this one, because this is something I think about a lot in my own personal investing, and I like to use the model portfolios that were developed here at the Fool by retirement expert Robert Brokamp, who's also the co-host of Motley Fool Answers.

Nathan, I'm assuming that you have more than 10 years left before your retirement, so for someone like you, assuming you, Bro advocates 25% of your portfolio for large-cap stocks, 15% each for mid-cap and small-cap, 30% to international, 10% to alternatives like real estate, and 5% to bonds or cash.

Those are just guidelines, of course, and everyone's situation is different, but I think it's helpful to have guidelines like that. And I know when I think about my own personal investing, I'm less of a stock picker and more of an allocator. I know that if I look at my allocation and my large caps have gone way out of whack, I'll try to pare them down. Or if I don't have enough international stocks, I'll try to bring that up.

Over the last year I've realized that I have almost zero invested in bonds, and that maybe it was time to get some bonds, so my 401(k) contributions have been going toward a bond fund over the last year. So that's something I try to think about. You can go and search for model portfolios on the internet and you'll find a lot of different suggestions, but that's just one.

The other one was really interesting to me and I'd be interested to hear what you guys all have to say. Nathan says he's committed to investing a little each month and he wants to know if it's better to add to current positions or to develop new ones.

Now me, personally, I went back and forth on this. I think it's a matter of personal preference, but I would take a stand and say for someone who's newer to picking stocks, I would spread it around among different positions, because what you don't want to have happen is you don't want to put it all in one stock and then have something bad happen to that stock and then get turned off from the game forever. I know there might be different opinions on that.

Kretzmann: If you're starting out, I agree with Matt. Your focus should be initially diversifying across a base, I would say, of at least 20 companies if you're going that route of individual stocks. Maybe once you're at 20, 25, or 30 companies, then you can start re-evaluating and say "OK, maybe instead of adding an additional new position, there's something I want to add to my original stake and bump up that allocation."

So I would start with that, and David, this might be an appropriate time to bring up the Gardner/Kretzmann Continuum as we're talking about the number of stocks...

Gardner: And here it is. This is obviously one of most important, I think, investing developments of 2018. David, if you'd share a little bit more, please.

Kretzmann: Sure. This is something we came up with earlier this year on this podcast...

Gardner: On this very podcast.

Kretzmann: The Daves combined minds and came together to come up with the Gardner/Kretzmann Continuum, which basically is taking the number of stocks you own divided by your age, and ideally you have a score of 1...

Gardner: Or higher.

Kretzmann: One or higher. So if you're 30 years old, we're saying you might want to have at least 30 stocks. If you're 50, at least 50. That's just one way to think about diversification. Obviously it's just a fun way, but an increasingly important metric out there in the investing community, David.

Gardner: I think part of it is just the name itself. The Gardner/Kretzmann Continuum obviously has a weightiness to it that I think really makes it possibly enterable for a Nobel Prize down the line at some point...

Kretzmann: I'm counting on it.

Gardner: ...if this kind of work continues to come out of...

Moser: Was there ever a discussion of perhaps the Kretzmann/Gardner Continuum? I mean, out of curiosity.

Kretzmann: No, David was the host of the podcast, so I deferred to him coming up with Gardner/Kretzmann Continuum.

Gardner: And I believe history will show that I think I invented the phrase literally on the spot, so there was no premeditation, but that's how, again, some of the best Nobel Prize-winning work, I think, happens. A Nobel Prize winning novelist -- those words are just coming out of him or her. It's not heavily premeditated. Novels don't go through multiple drafts, do they?

Kralj: Also by virtue of the definition of it, David's older and will have a larger collection of stocks.

Gardner: I should. So slightly more seriously, yes, the concept of the Gardner/Kretzmann Continuum is that you should have a number of investments at or above your age. For a 15-year-old... Jason, I know your girls are getting near that age.

Moser: They are. I'm glad you brought that up, because I was going to use them as sort of the benchmark for me, because they are 12 and 13. They probably fall right at about 1. I think they have around 12 different holdings now, but the rule that we set up for them -- they started investing at around six and seven, or five and six, or something like that, and once they buy one holding, it's off the table. Then they have to buy a new company. And so once they bought Starbucks, it was no longer under consideration. They now have to buy something else.

And the reason for that was absolutely diversity. I wanted to get them to build a diverse portfolio of holdings that they wouldn't have to sit there and worry about. Everybody's risk tolerance is a little bit different. I definitely don't fall on the Gardner/Kretzmann Continuum at 1. I'm lower. I feel like I probably have a little bit more of a risk tolerance.

Gardner: You're still welcome to the table here.

Moser: I have a little bit of high-risk tolerance, I will admit, but I think for most people, the way that you more or less make yourself immune to these market gyrations is you never know what's going to happen. Diversity really does change that factor. It just changes everything for you. So if you have a nice, diversified portfolio, it really takes a lot of the thinking out of it.

Gardner: And before we go to our last one, and Rob, you're going to bring that to the table, I do want to just mention that in Part 1 of this series, of this two-part series, we talked a little bit more about getting kids invested, and we reflected that a lot of us had gotten invested ourselves because our parents had started us. And so Jason, just thinking about what you're doing for your daughters. Rob, you mentioned earlier your 19-year-old son. I've done some for my kids as well.

So one of the best ways to get others started investing, which is the point of this series, is to ask who around me is close to me, because they're probably family to me and they might be younger than I am. And am I getting him/her/them started investing? And so, a lot of the good work that's being done by this series I think, in part, is often the most easily and effectively done when you're getting younger people started that you care about.

Kralj: The story of your uncle helping you and Tom get started was one of the first exposures I got to that. And then listening to these podcasts all the time, I've heard Jason talk about his daughters a lot. And then there's David Kretzmann, so there is quite a continuum, here. David Kretzmann and Aaron Bush are the two models I hold up for my 10-year-old, who is, whether he likes it or not, listening to these podcasts when we drive around before he gets his music.

Gardner: Isn't it nice to hear Dad? Zack, how about it? It's Dad with us this time.

Kralj: He'll be excited to hear this. And as Jason was just saying, I started him early on, too, and he's got about 10 stocks in there now and he's 10 years old now, so he's on the continuum.

Gardner: The GKC.

Kretzmann: There's something to this, David. The GKC.

Kralj: But I am more with Jason, personally. I like to run my portfolio as a team, so I think of it as like a sports team, basically. I've got my rookies. My experienced veterans. And I like to keep that roster at about 30 companies. And part of that is just because I don't want to have to keep thinking about all the other companies.

Now, I know that in a lot of your cases you've got stocks that have just languished in there. Very small positions.

Gardner: That's right. Some of my 50 or so are ones that I don't follow nearly as much, and they don't count for nearly as much.

Kralj: That may well happen with my portfolio down the road as well, and I can see certainly the reason behind it, but I do like to keep it at a limit.

Now the one question that I have here also fits into this -- and clearly two things that whenever I talk with members I always share -- are basically patience if you want to succeed at this. So that means allowing the time that this takes to succeed. And the other is obviously diversification, which has come up in many forms so far, here.

The question I have is from a Patrick Hoffman, who also asked, "Could you kindly provide a brief strategy regarding diversification in a new portfolio?" We've covered quite a bit of that here, so I'll just add one little thing to that. That when I do get a chance to talk directly with people, I always emphasize that for everybody it's different.

For me, I'm quite comfortable with the volatility that I experience with this pretty high-beta portfolio that I alluded to earlier. But for somebody newer, I don't think that would be easy to tolerate at all. Also for someone closer to retirement age. They may be looking for very different things. They may want income. They may want a dividend-paying stock.

So I always tell people to think of how they judge themselves in terms of how they're going to handle risk and reward. Would they be more comfortable if they had a nice, slow, steady gain but something that didn't fluctuate violently during a bad time in the market versus if they think they could handle a lot more volatility and they're willing to trade that stability for the potential benefit down the road. I always emphasize that if you're new to it, try not to assume that you can handle the volatility too quickly, because it can be pretty scary for a lot of people.

So building your portfolio -- I think I mentioned earlier -- I started out 50-50 blue chips and Rule Breaker types. I am comfortable where I've gotten to now with the incredibly volatile ride that I'm going to experience, and that will probably only get more dramatic over time. But I've got my own coping mechanisms for that, and I think everybody needs to consider where they fit on that spectrum.

Gardner: Well put, Rob. When you talk about being comfortable with the ups and the downs, they get bigger over time. From a percentage standpoint, the ups and downs don't necessarily change much from one decade or era to the next. The stock market is volatile. As I've often said in the past, it seems to me stocks always go down faster than they go up. Good news, though. They always go up more than they go down.

But if we're doing our job right, both as investors ourselves, and as people that I hope you're enjoying listening to this week talking about this craft that we love, if we're doing a good job, then all of us are making more money over the course of time, which means when the market drops 10% in the year 2043, that's going to lose you a lot more money than it is this year in 2018. So 25 years from now, if everything is going up, the amounts will get bigger, but remind yourself of the percentages, because often it's percentages, not points, that ground us.

Kralj: I think of Mark Zuckerberg losing a couple of billion dollars in the span of an extremely short period of time and thinking how lucky he is that he can lose $2 billion that quickly. And for me, my last two weeks I've lost more money than I've ever lost investing, but that's by virtue of the fact that I've made more money than I ever imagined I would.

Gardner: And I'm probably not the only one who saw the article about Jeff Bezos losing more money in two days than any human being ever had, so these things should not surprise any of us. This is going to be what you presumably would hear for the rest of your life assuming that things continue to go up, which I do assume that they will. So with all that said, it's also just other human measures, like the number of millionaires today is higher than it was a century ago, and there will be far more a century from now.

Well, this was a lot of fun, and I want to thank, again, David Kretzmann, Jason Moser, Matt Trogdon, and our new sidekick friend whenever he comes into town, Rob Kralj. Guys, you did a great job with the thinking and the wisdom.

You know, the first part of this series a month ago, which was the Oct. 3, so you can point any friend to it, Rule Breaker Investing podcast called "Get Started Investing! (Part 1/2)," and there we were long on steps and actions. We talked about the practicality and what you need to do. What we did this time, the Nov. 7, Part 2/2 of "Get Started Investing!", is we thought a little bit more deeply. We went to Level 102 above 101, and we tried to share some more wisdom. And I was very pleased and proud to be surrounded by this group of Fools full of that kind of wisdom.

I really want to thank you guys again, and most of all, though, I'd like to thank our listeners for suffering Fools gladly, which you do seem to do every week across this and all Motley Fool podcasts. I hope you have a great week. Fool on!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. David Gardner owns shares of Activision Blizzard, Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, Netflix, and Walt Disney. The Motley Fool owns shares of and recommends Activision Blizzard, Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Boston Beer, Facebook, Netflix, Trex, Twitter, Walt Disney, and Wayfair. The Motley Fool has the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, short November 2018 $155 calls on Facebook, and long November 2018 $135 puts on Facebook. The Motley Fool recommends AMC Networks. The Motley Fool has a disclosure policy.