In this week's mailbag episode of Rule Breaker Investing, David Gardner reads and responds to some listener mail. The number of public companies on the NYSE is trending down -- will it ever trend so low that public market investing will be a thing of the past? What will happen to individual investors then? Is investing in 50-plus companies really equivalent to investing in an index fund? Plus, David responds to some non-question mail, too, following up on some Foolish investing journeys, commenting on best practices for hiring new employees, and answering the question of Why We Invest with some essays, some poetry, and some anecdotes.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on Dec. 17, 2019.
David Gardner: It's the last week of 2019. The last week of the year that saw the stock market prove optimists right once again. Every time someone called for recession, the market seemed to bounce back or rise 5% more. And 2019 was a great year for Rule Breaker Investing. Our stocks, our style, but more to the point here, our podcast. Thank you for suffering Fools gladly throughout the year, and we're at the end of it. And you're here with me, a fresh 52nd final weekly podcast for 2019. And it's, of course, your mailbag, this week on Rule Breaker Investing.
Welcome back to Rule Breaker Investing! This podcast is coming out on Christmas Day, so Merry Christmas if you celebrate Christmas. Happy Hanukkah, Happy Kwanzaa, happy holidays. In fact, we say at The Motley Fool, happy folly days to you and yours wherever you are worldwide. I'm delighted that you made the time to check in with me this week. It's a really busy week and I can imagine not a lot of people should have probably listened to this on a big day like Christmas day, but maybe you're checking in Thursday, Friday, or three years later. We're here for you. This is the mailbag edition December 2019.
I like to spend a little time at the end of each month looking back at where we went together over the course of December 2019. So, we kicked it off on Dec. 4 with Company Culture Tips: Volume 6. I had my talented friends Kara Chambers and Lee Burbage in here to talk about free ways to improve your corporate culture. whether you work in an office like The Office, which, by the way is a pretty fun place to work, I think, or some place that is, let's say, less dysfunctional than The Office, the great NBC show, I think we have ways for you to improve how you do what you do. And the beauty of Company Culture Tips: Volume 6 is, all of them are pretty much free or really cheap.
The week after, it was our Games, Games, Games episode. I did present some of my favorite holiday game gift ideas in that episode, as I try to do every year. I also talked about Investor Island and reviewed five stocks I picked three years ago, 5 Stocks to Put Under The Tree, and how did they do. That was Games, Games, Games.
Last week, of course, The Market Cap Game Show. One more week of games, and Aaron Bush versus Emily Flippen in our new rebooted approach to The Market Cap Game Show. That was a lot of fun.
Which brings us right through to today. And let's start off with hot takes, as I like to do, from Twitter. This one comes from @anandkatri. Anand, you say, "Listening @rbipodcast last Wednesday during my commute. It was a great episode about work culture. But the thing that caught my ears was the Investor Island game. Started playing later that night. I'm playing first live game this week. Thanks, @davidgfool, and looking forward to playing with you." Well, thank you, Anand!
I'm also going to read one more in this same vein. Craig Edwards, @crxinvestments. Notice the seriousness of a Twitter handle like this. Craig, you are a professional investor, as am I, and yet, what are we talking about? Craig says, "I don't usually play games on my phone, but this is about to change. I Can't wait to play Investor Island. Hopefully my kids will play it too and get interested in the stock market."
Yep, so, Investor Island did launch here in December 2019. Thank you very much Anand and Craig. I do want to just share jason104's review of the game. Just, this one brought such a smile to my face. He said, "Five stars. This game is so much fun." He goes on, "My 10-year-old son and I just finished our first head-to-head game. I had the advantage because he wasn't born in time to experience firsthand the 2008 recession. He selected iRobot, I picked Target. He learned a valuable lesson -- that in a recession, consumers trade down to discount retailers, not up for robot vacuums." So, a great review.
So much good feeling around this game. I'm obviously delighted by it. I hope you enjoyed my friend Max Keeler, our fearless leader today, talking about the game with me just a couple of weeks ago. It really is great to play with friends and family and to think of the people who, like jason104, they're enjoying it with their son. It's an introduction to the stock market. But really, anybody who's played it knows it's not really some boring stock market simulation. This is an active strategy game built by an Irish team that helped do a lot of PopCap Games like Bejeweled and Plants Vs. Zombies. So, it's got, I hope, that jiggle and that fun, and I certainly will enjoy playing some of my listeners. I am David, so if you play a head-to-head game against somebody named David, that's me on Investor Island. So, yeah, I'm there too. And thank you very much all Fools, especially Anand and Craig, who took the time to write in about that.
Also, Paul Essen, @paul_essen, said, I love this one, of course, on Twitter, he said, "Around the 24:15 mark on the most recent Games, Games, Games episode, in reference to giving stocks to kids as a gift, David said that it can be a 'life-changing' thing. Don't you mean 'life-improving?' :) #petpeeves." Paul, you and I have worked together in the past. You know me. You're also a listener of this podcast. And you know that one of my pet peeves is when people say, "It changes your life, it'll change your life," because that's ambiguous, right? Everything's changing all the time. The only constant is change. So when somebody says something's life-changing, I immediately make jokes about, like, do you mean life-improving? Or are things about to get worse? Because either can happen when your life changes. So, Paul, you knew that I meant to say life-improving. You caught me. Thank you! In fact, I'm always encouraging people to call me out when I get things wrong. We've got the dead arm rule. If you ever hear me say the phrase "long-term investor" outside of this context, you're allowed to give me a dead arm. I don't say long-term investing. I know a lot of you know that. Because I think investing is by definition done over the long term. It doesn't make sense to use the tautology long-term investing. So, life-improving. Yes, we pay very careful attention to language on this show, and I'm as guilty as the rest of us. But at least I'm trying. And I've got smart friends like Paul to keep me honest. So thank you, Paul Essen!
And finally from Twitter this week, Wes Yee, @wesyee. Love this. Thank you, Wes! "@davidgfool was the first person to really break it down and help change my mindset in this area when he reviewed every Rule Breaker pick and found that, if I recall correctly, he says two to three of his best picks outweighed his 50 worst." And that is true. In Rule Breakers the service, just MercadoLibre, our top performer, has basically wiped out the losses of all of our worst 50 or so stocks. Wes goes on, "In around 10 years of investing, my experience has actually been even more extreme. My biggest winner to date, Shopify, actually accounts for 4 times all my negative holdings. No doubt this is short-term noise or luck and not indicative of some special strategy, but it is a great reminder that an outsized return on an investment, one that could even offset the losses of multiple positions, in order to have that, you must hold onto it." This is really why I'm sharing Wes' point here. He said, if he had sold his Shopify position when it had doubled, or tripled, or quadrupled, or gone up 6 or 7 times his initial investment, which it has now, he would, of course, be worse off. So, Wes concludes, "Ride your winners. I reloaded on Shopify and MercadoLibre 5-plus times as they grew. When you find strong companies, lengthen your horizon. And when they show improvements, don't be afraid to add on."
So these are some of our cardinal points. I think anybody who's heard this before knows that I'm always going to be the first to say, also, obviously, don't overbalance too much into any one position. We do like to spread out our investments and diversify. But we let our winners win. And we try to add to them on the way up. So, there is a context, there's a golden mean here where you keep a position like Shopify large enough to make it really matter, but don't tip your entire boat toward one or two investments. It's a great problem to have, by the way, when you have a stock like Netflix, which, and I checked this, 10 years ago this week, Netflix was at $7.68. From there, 2010, one year later, and it gone to just about $50. And then one year after that, remember Qwikster? It gone from right about $50 back to below $10. So you held for two years, Netflix, and you were back to even after having made 6 times your money. But if you just kept holding through Qwikster, today, Netflix around $315 as we record this podcast. So, not a bad 10 years. 10 years ago this week, Netflix down below $8. Today, around $315. But you have to hold on to it to enjoy these gains. And this is where I hope The Motley Fool's voice sounds strong and feels global to you in terms of the effects and the influence that we're having. Because you're not going to hear this message very often, especially from financial media or ads that are telling you should trade or jump in or out or price targets and this sort of thing. So I think we're a real contrary voice, but I hope it makes sense to you and speaks to you. It's wonderful to hear it mirrored back by smart people like Wes, who take the time to share their real-life experience and remind us of what really works for your investing.
All right, Rule Breaker mailbag item No. 1 this month. And this first one comes from Roy Klosowski. Roy wrote, "Hello, David. I've been a Rule Breaker Investing podcast listener for just over a year, as well as a Rule Breaker service member for about six months. I'm 24 years old. I have a very long investing life ahead of me. But with the New York Stock Exchange shrinking from its peak in 1996, with 7,322 companies listed in 1996 to approximately 2,400 companies today, my concern is that this trend is going to continue. Is it possible that we see this shrinkage continue until only a select few companies are listed and stock market investing becomes an unfruitful effort? I appreciate your time. I'll continue to Fool on from here in Huron County, Michigan. Roy."
Happy folly days to you, Roy. And thank you for the question. And I understand the concern. I mean, it is surprising to be reminded of those numbers. I like that you brought numbers, Roy. You got what looked like very specific numbers. From 7,322 companies down to 2,400 here over the last 23 years. So we've lost -- on the New York Stock Exchange, anyway -- two-thirds of the listed companies. Now, that doesn't take into account the Nasdaq, where there are thousands of companies as well. And you could include things like Nasdaq over the counter, although I usually ignore it. Very small companies. And I believe, although I'm not looking at data right now, I believe the Nasdaq has also had some shrinkage over the last 20 years.
But when you take it all in all, you've got somewhere in the order of 4,000-plus stocks that you or I could buy. Increasingly these days for free, in an increasingly commission-free world. And coming here in the new year 2020, big firms like Schwab are about to commit to fractional share purchases, which means -- this would have sounded like a miracle when we started The Motley Fool as a newsletter for our parents' friends in July of 1993 -- which means these days in 2020, you can basically buy stocks for free, no commission, in fractional share lots. That is amazing and is really democratizing the markets.
But Roy, your question is not about the past, it's about the future. And what I'm here to say is, I really can't predict for you whether companies are going to continue favor being private in some cases, like Uber waiting a long, long time to go public because they view the regulations and pressures of being a public company onerous. And so increasingly, it seems like, companies wait to get large before they do go public, whether we see more of that, or maybe we'll start to roll back some of that regulation. There have been laws put in place in recent years to make it easier for younger, earlier-stage companies to go public without quite as much cost or pressure. I mean, our company The Motley Fool is kind of a funny example of this, because, of course, we love the markets, and we're a private company. We love being private. We have no plans to go public anytime soon, and we're in our 27th year. So, I hope it doesn't sound hypocritical that I appreciate everybody else going public, while I appreciate being a private company ourselves.
But I guess my feeling here, Roy, is this. First of all, 24 years old. Awesome. I'm so glad you're listening. You're paying attention and investing. Congratulations. You've got at least 70 more years, probably more than that, to be an investor. I suspect that most of us probably need 50 to 100 good companies over the course of our lives. Some people like to have big portfolios, like 75 stocks. Some people like to start with 15 or 20, and then, over the course of the next 10 or 20 years, you'll find 10 or 15 more. We don't need anything like 4,000 companies to be successful investors on the market.
And I'll just say in closing that I find no difficulty every single passing month -- and I've done this for 15-plus years now -- selecting one new Stock Advisor stock and two new Rule Breakers stock picks. I have no problem among the dwindling numbers, still numbering in the thousands, of companies that you and I, I think, can and should in to beat the market going forward.
So, I hope that steels your confidence. It's definitely worth it. I doubt things will go away. There's only going to be more entrepreneurship over the next 25 to 50 years. And if in fact, things increasingly go private, well, the private markets will start to open up more, and we're already seeing that in some cases, too. Last year, the Motley Fool opened up our first venture capital fund. Why did Motley Fool Ventures start? Because a lot of you, our members, said, "Hey guys, not as many companies are coming public, so what if The Motley Fool made it possible for me to invest in companies when they're earlier-stage and private?" And so, you can look at Motley Fool Ventures as an example of that. And we're just one tiny example. But you can see that in the end, if you have an investing dollar saved, you're going to be able to find a good place to put it. I'm very confident that will be just as true in 2050 as it is here in next year, well, just a week away, 2020. Thanks, Roy!
All right, Rule Breaker mailbag item No. 2. This one comes -- oh, this is a resend, a tap back from Marcus Rose. "Hi, David. It was an honor to be featured on RBI this week. Couldn't keep the smile off my face all day. I especially appreciate how kind and generous you were in interpreting my words and my intentions. This exchange with you has added a ton of fuel to the fire. See you soon, Marcus."
Well, the reason I wanted to share this one is simply because I love Marcus's story. It was last month's mailbag. He works at the Royal Australian Air Force and he talked about coming from a family where he didn't have a lot of financial literacy. But at a young age, he's figured out two important things -- the power of investing, whether you're in Australia, or the United States of America, or Timbuktu. This is a global phenomenon, the power of saving and investing. And then, second, looking for businesses that are doing good in this world. And there are a lot of them, even though they tend not to make the headlines like other areas of the media. It seems like the bad eggs get a lot of the press. But, looking for companies that do real good, and then putting our money there. That, in a lot of ways, is just what we're trying to do here at The Motley Fool.
If you look at it as a great big machine, The Motley Fool machine, you and I are all parts. We're basically allocating more intelligently our money. We're putting it into companies, as we recommend a great company like Shopify, we're all putting our money there. And then Shopify flourishes. And if we're right, the world gets better. And we more smartly allocate it than if we'd put the money in, I don't know, Blockbuster instead of Netflix, or buy.com instead of Amazon.com. So, just looking for the people and businesses that are doing well by doing good, which is a conscious capitalism concept. That explains, in large part, what, Marcus, you and I are talking about. And it always puts a smile on my face to think that I put a smile on your face by mentioning you on the podcast.
Which is a reminder that at the end of every month, I love to hear from you all. So, firstname.lastname@example.org is our email address. And you can, of course, tweet us, @rbipodcast. We read all your stories. Of course, we can only feature a minority of them from one month to the next. But be persistent if you, too, want to one day have a smile on your face because I'm talking to you through this podcast. Thanks, Marcus.
And actually, before I go to item No. 3, I will just mention, it is the holiday season. And the No. 1 thing on our wishlist here at Rule Breaker Investing, and really across all of The Motley Fool podcasts, is some ratings and reviews from you, our loyal listeners. I know it sounds crazy, but those little things help us reach more people in places like Apple podcasts, and that means more resources for our shows. So if you have a few seconds, my wonderful producer Rick Engdahl, I, and all my many guests over the course of 2019 would love it if you would drop us a rating and a review. It takes just seconds but it's a huge help to us. Thanks!
Rule Breaker mailbag item No. 3. This one comes from Mark Kirch. Mark, thank you for the note. "Dear David, 2.5 years ago, after listening to Motley Fool podcasts for years, I finally decided I was tired of my "gentleman's C" in index funds, and went all in on Foolish investing, joining Stock Advisor and Rule Breakers. I'm 50 years old and have already accumulated a decent chunk of savings in my IRA. So when I decided to make the transition, I was overwhelmed by all the choices. I started out thinking my strategy would be to choose 20 or 30 different companies from Stock Advisor and Rule Breakers. But then I learned about the Discovery Rising Stars portfolio, which I really liked. And when I joined Rising Stars, it also gave me access to the Next Home Run portfolio, along with a number of Motley Fool special reports. All of a sudden, I had more great stock recommendations than I knew what to do with." And I'm skipping a little bit, but he basically decided, he says, to just buy all the recs.
He goes on, "I decided to invest 30% of my savings in the Rising Stars portfolio, 30% in the Next Home Run portfolio, with the remaining 40% in companies recommended in Stock Advisor and Rule Breakers. Over the past two years, I've gone from owning zero individual stocks," again, two years ago, "to owning 152. Now, to my question. I've heard it said numerous times on different Fool podcasts, most recently by Morgan Housel on Motley Fool Money that quote, 'If you own stock in more than about 50 companies, you might as well just buy an index fund because your returns will begin to mirror those of an index.' Being a loyal Rule Breaker Investing podcast listener, this statement made Foolish alarms go off in my head because it sounds an awful lot like unquestioned conventional wisdom. What evidence is there that investing in even hundreds of Foolish recommendations will result in such a dilution of returns that they mirror an index?" Well, there's a little bit more in this note, I'll share in a bit. But let me just pause it right there and speak to this, Mark.
I appreciate your thinking. First of all, congratulations on going from zero stocks to 152. And whether it was 52 or 152 doesn't matter too much to me. What I hear is somebody who's gotten invested, and made a real commitment as a lifetime investor to the stock market. And I love that you're picking individual stocks. Yes, you could have just stuck with the index fund -- although, as you mentioned, a phrase I use a lot the, gentleman's C will, sure enough, always get you a subpar market return. Right. Because even the cheapest index fund is just giving you what the market's average return was for that year, or that period, minus some of its fee, which means you'll always be behind the stock market's averages. So I celebrate, of course, as a fellow Rule Breaker, the act of taking charge and buying some individual stocks. And by the way, a lot of our listeners have index funds and stocks besides. We're all different, and it's all how you want to spend your energy. But I think this is outstanding, Mark.
To your point about the conventional wisdom, that if you have a certain number of companies, well, that would just be, why don't you have an index fund? I guess I want to say things out of both sides of my mouth. So I will say with Morgan, or anybody else who just wants to run the math, that the greater the number of stocks, the more it will tend toward an average. If you own 4,000 companies, you're much more likely to have the market's average return than if you have 400 companies, or 40 companies. So I think we can all agree that every stock you add makes it more likely that you will get closer to the market indexes.
However, out the other side of my mouth, I want to say that part of the reason index funds underperform is because they keep selling out their winners over the course of time. If you hold an index fund for 10 years and you have a stock like Netflix, well, it's actually up about 40X in value over the last 10 years, but an index fund would keep selling its Netflix to make sure it didn't get out of proportion to the rest of the stocks in the index fund. So, just because you might have dozens of companies and start thinking, "Am I an index fund?" If you're investing like I've talked about for 20-plus years at fool.com, or four-plus years on this podcast, you'll know that I think you should hold on to your winners. Let them win. Consider adding to those winners. That is what no index fund ever does.
So, it doesn't matter to me too much whether you have 52 stocks or 152 stocks. If you have ones that beat the market, the best will wipe out all your losers, and you'll be investing more patiently. Also, hint hint, when you own stocks directly, you don't pay an ongoing fee year after year to have your index fund managing your money. You just hold your companies until one day, you choose to sell them and pay a capital gains tax. Much more tax efficient. There are many advantages to owning stocks directly. Again, whether you have 52 or 152. And I hope I'm opening some eyes here as I say that.
Mark goes on to conclude, "My working investment philosophy is to think like a venture capitalist, placing small investments spread among many companies, with the anticipation that a few of those companies are going to achieve extraordinary returns. When I see a new Rule Breakers recommendation, I have a hard time refraining from investing at least a small amount in it, just because I never know which company is going to be the next Netflix or Amazon, and I have a bad case of FOMO," which is, of course, fear of missing out. Well, thank you for that note, Mark.
Two thoughts upon conclusion. First of all, I love how you say you're investing, thinking like a venture capitalist. That's exactly what I was writing in our book, our 1998 book, Rule Breakers, Rule Makers. I was saying, let's treat the public markets like venture capitalists. Most people trading won't. Most people don't have that mentality. They're not willing to take risk on earlier-stage companies. And often, they don't hold them for 10-plus years, as venture capitalists do. So, let's be contrarian. You understand this, Mark. Let's think and act like venture capitalists using the public markets. And indeed, we have crushed the market averages by doing that over the course of time.
You also mentioned in closing FOMO. It does sound like you might be a little susceptible to FOMO. I certainly can understand. I think others can probably relate to that. It is true that we at The Motley Fool have a lot of different services. We generally always have a new exciting stock that we're talking about or thinking about. We recommend them in our services. We're excited by the new technologies that are always coming online and the new possibilities. I think, though, you shouldn't worry too much about FOMO with 152 stocks.
Final thought on that number. That's going to open some eyes for some listeners. They're going to be like, "Wow, that's way more stocks than I would ever buy." And sure enough, most people probably won't buy that many stocks. I will say, Mark, that when you have that many, an individual stock doesn't matter that much, so you end up saying, "What are my bigger holdings? What are my winners among those 152?" Because when you have a lot of companies, you really don't have to monitor them all. If a position is less than 1%, or less than 3%, I'd say, which is going to be true of the vast majority of those positions, I would encourage you not to spend as much time with those. Make sure you're focused on where your dollars are most allocated. And again, that goes for all of us, regardless of how many stocks we have.
Rule Breaker mailbag item No. 4. This one comes from Caroline Smith. I know people who have the name Caroline can be a little touchy if you say it the wrong way, but it's very ambiguous for the rest of us. I'm going to go with Caroline Smith, though. I hope that worked for you, Caroline. Thank you for this note!
"Hey, David. I know, I know, I'm quite late with this email, but sometimes when I've run out of current Fool podcasts to listen to, I'll scroll back through one of the shows to pick out an episode to listen to that's likely still relevant today." Caroline's going to the Wayback Machine for this one. She says, "Which is what led me to your June 2018 RBI podcasts. You were talking to a current Fool who's spent much of his 13, now probably 14-plus-year career at the Fool on this podcast discussing how A's hire A's, B's hire C's, C's hire D's, etc." Before I go on with Caroline's note, I just want to make it clear. Yeah, that's an old saw. It's something I generally believe, which is that if you're an entrepreneur, you should have your best people doing your hiring, because those are your A players, and darn it, you're going to be much better if you have your A's hire for you, do the interviews, even if they're not going to work on the team. That's something we do here at The Fool. We have some of our best talent just sit in on job interviews and evaluate the candidate, even though they won't be working with him or her, because they're A's, and A's hire A's. B's hire C's, the implication being less able people. Now, this is not always true, and this is not cynicism, either. I think that this is kind of understandable, but sometimes, less able people look for people even less capable than they are to hire because they'll be their boss, and that can trickle down in a bad way in environments. So, that's what Caroline is referring to.
She goes on to say, "I agree with you in general, but as someone who's typically been considered an A employee in my life," and by the way, Caroline, you and all of my listeners are all A players. I mean, that's who listens to this podcast. We don't have C's or D's listening to Rule Breaker Investing. But you go on to say, "I like to try to hire A+ employees when I can. And if I'm hiring for help in an area where I'm a B+ or even just a B, I like to hire an A employee, not a C employee. I'm not at all threatened by people who are smarter than I am in one or all areas." I love how she puts this, "In fact, given the alternative, I prefer it. It makes for a stronger team, a stronger company, and let's face it, a little less work for me if I've got employees smart enough to figure out stuff before I do."
She closes, "Thanks for everything. Your many podcasts, along with my Stock Advisor and Rule Breakers subscriptions have enriched my life in so many ways and have saved my bacon in ways big and small over the years. Fool on, Caroline Smith."
Well, I really appreciate that, Caroline. And that's the same spirit. We don't go with the pluses and the minuses; we just go with the straight letters. A's hire A's, B's hire C's. But you're right, always look for the A+, whether you're an A, a B, or a C. The better talent that you can bring into your organization, the stronger it'll be. I realize, especially in larger corporations, it can get more political. There are just so many different teams, divisions. It feels great to be in charge of a big division. And sometimes it's not necessarily merit that gets people there, it's who they know. I sure hope that never happens at The Motley Fool. I'm sure we're all human; in some ways, it does. The politics that play out in offices are a real human dynamic. But the strongest companies are going to be the ones that transparently recognize who's really adding value, investing in those people, supporting them, and enabling them to hire and grow the culture, and, indeed, the company itself. So, I wish that for my company. I wish that for yours, Caroline. I wish that for all stocks that we would ever invest in.
And I do want to read this postscript, because Caroline, clearly, you and I are birds of a feather here. I appreciate this. We're about to go back to language pet peeves. "Also a pet peeve of mine, perhaps it's one of yours, too -- when I ask someone a question that they don't know the answer to, and instead of responding with a simple 'I don't know' or 'unknown,' they respond with 'unclear.' Drives. Me. Bananas. Yes, if there is some ambiguity around a situation and one is trying to discern exactly what is happening there, maybe one is sorting through contradictory information from several sources, and then the appropriate response is unclear. But if a person simply does not know the answer, why can't they just say, 'I don't know'? Do they think saying unclear makes them sound smarter somehow? Or are they embarrassed or insecure about revealing that they simply don't know the answer to a question, so they think unclear provides them with cover somehow? I don't know, but it bugs the daylights out of me. And I would love to hear your thoughts on this on your next pet peeves podcast, if it bugs you too."
Well, I have to say -- we're not even saving this for next pet peeves podcast, I'm just sharing here on the mailbag. You know we love language here at Rule Breaker Investing. Pet peeves are how we roll. I didn't previously have this as a pet peeve, but now you've kind of alerted me, you've activated me now, Caroline. And I'm probably subconsciously, at least, going to be on the lookout for unclear. And maybe I'll ask somebody at that point, "Why are you unclear on that?" which I think is the operative question.
Before we get to our final mailbag item, in fact, I'm going to share my Why We Invest essay, which I like to read in the final week of every year on this podcast, and then I'm going to go to our final Rule Breaker mailbag item No. 5.
I do want to mention, the pet peeves that you share with me -- I, of course, share my favorite ones back out through this podcast, but they really do affect me. I remember a year or two ago, one of you said a language pet peeve of yours, it wasn't mine at the time, but I've noticed it ever since. You said, "One of my pet peeves," whoever you were, longtime Fool listener, and thank you for this in 2018, you said, "one of my pet peeves is when people say at the end of the day," which is usually not literally true at all, and just kind of a figure of speech, it doesn't add a lot of value. They're trying to make a big statement, I guess. It's not even that wrong. There's nothing ungrammatical about it. But that kind of stuck in my mind, and now it's stuck in my craw a little bit. When people say, "at the end of the day," I sort of chuckle, look askance, or challenge them a little bit on that phrase. So, yes, what you say to me through your notes in mailbag really does stay with me, and I hope the best stuff that I say back stays with you. All right, thanks, Caroline!
Now, as I mentioned earlier, I'm going to present something that I love to present the final week of every podcast every year, my reflection on why we invest. And then, I have parked a final Rule Breaker mailbag item after that.
So, Why We Invest. This was an essay I first wrote nine years ago this month. It was December of 2010. And ever since opening up this podcast in 2015 -- I think I've done at the end of '15, '16, '17, '18, and, yes, now '19. 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 for you this week, 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 are doing something very wonderful and very difficult. We are forfeiting the enjoyment of the use of this capital in the near term, and all of 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 forego 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 willing 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, Rule Breaker Investing, as a more aggressive investor seeking to maximize my returns, I flat-out know that I will lose money on many occasions. You 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 will 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. We share it every month on this podcast, 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 100 other reasons besides. These are all, in part or in whole, why we invest. Keep at it, dear Fool.
And I think this is around the time every year where I like to share a quick poem. This one came from our discussion boards. One of our community members, Captain Haiku, who tends to write poems -- and I actually know this as a pair of sisters who came up with this years ago, and I like to share it back because well, you'll understand. Here it goes.
Captain Haiku. This is going to sound like a bunch of haikus strung together.
Sorry, can't truncate.
Each word has import and heart.
Not selfish, we build.
Many years gone by.
Hard work, hard times, good times, too.
Haiku needs little.
Why do we invest?
So that our hard work endures
beyond our short years.
So that our children
start their journeys on a hill
and see the mountain.
We build battlements
that endure, shelter others
from the worst of storms.
We launch sturdy ships.
We will not see the far shore
but have no regrets.
We are a small part
of all we set in motion
and thus we invest.
So, there's some essay, and there's some poetry, and let's close it all out in 2019 with Rule Breaker mailbag item No. 5. And doesn't this flow in a lovely way from what I just shared with you?
"Dear David, my wife and I recently had the honor of attending the wedding of a 30-year-old woman I have known since the new bride was 12 years old. One of the most satisfying things in life is to watch young people grow up to fulfill the potential you thought you recognized in them when they were children, and to become the kind of people you hoped they would become. For a wedding gift, my wife and I decided to go off the registry. Instead of giving them the equivalent of a set of lovely candlesticks, we opened a brokerage account on their behalf. I then bought a single share of 16 different companies, about $1,000 worth of stocks in all, and transferred those shares into the couple's new account. Many of the picks are Motley Fool recommendations. Single shares of Disney, Etsy, Planet Fitness, PayPal, and Teladoc. Others are well-known consumer facing companies such as Nike, Under Armour, Delta Airlines, Dunkin' Donuts -- that's the groom's favorite coffee chain -- and Verizon, the bride's mobile phone provider. With two exceptions, all the companies trade for less than $100 a share, which allowed us to give a larger number of companies, and with the recent demise of trading commissions, I was able to buy them all, saving about $80 less than this idea would have cost just a couple of months ago.
The intent of the gift is education. It is a tuition payment. Our intent is for the young couple, who have decades of compounding ahead of them, to watch these small, diversified starter positions, watch other companies and the markets in general, and to learn from what they see. This little portfolio could lose 50% or more of its value in a few years. That's OK, because if that happens, they will learn from that experience at no cost to them. Indeed, lessons from early setbacks will be even more valuable than lessons learned from successes. It's possible that as they add to this little portfolio, it will be the acorn that grows into something bigger than they ever thought possible. They are also free to cash it out tomorrow, of course. And to help them on this journey, we also gave them a copy of your book, The Motley Fool Investment Guide. OK, so maybe this wasn't the world's most sentimental wedding gift, but I can't help hoping that decades from now, it may be the one that made the most difference in their lives and in the lives of their future children, God willing.
If you end up using this story on the podcast, please make us anonymous. Maybe other listeners might consider doing something similar for young couples in their lives. Signed," a longtime Motley Fool member whom I appreciate but I will not name, "Anonymous."
So I will simply say in conclusion of this podcast, in conclusion of the year 2019, that is why we invest, and often, it's for others. Fool on!