January 2020 Mailbag

In this week's episode of Rule Breaker Investing, Motley Fool co-founder David Gardner answers some of your listener questions, comments, and stories. Chris Hill comes back to talk about "The Day the Market Crashed," and the many listeners who skipped the intro that explained it wasn't real. Investor Island developer Max Keeler shares some tricks and tips, and a couple of previews of upcoming spells. David gives some advice on how to invest when your investments just keep losing to the S&P 500. One listener writes in with a way to explain investing to gamers; another reminds us of a classic Foolish investing success story. Listen in to hear more.

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 Jan. 29, 2020.

David Gardner: January 2020 was the month the market crashed -- well, on this podcast. Did you listen to "The Day the Market Crashed" a few weeks ago on Rule Breaker Investing? A lot of you did. We got perhaps our biggest Twitter response yet. Chris Hill is going to join with me again this week just to talk about that. Now, I'm pretty sure you know this -- the market didn't crash. It doesn't very often. But there are certainly downdrafts, which can come suddenly and painfully. But what about when the market is up, as it is most years and has been for years? Then you might have one of two problems with that. First, what if though the market is up, you aren't so much? Your stocks, your portfolio, you're underperforming. I'll speak to that. Or, second, what if since the market is up and up and up, you're worried that a purchase today will turn into a sudden loss tomorrow? I'll speak to that, too. These are all driven by your questions, your questions, and my talented team's best answers. Questions and answers? That could only mean it's mailbag week on this week's Rule Breaker Investing. 

All right, welcome back to Rule Breaker Investing. I'm delighted you're with me. It's been quite a month for Rule Breaker Investing. We started off with Stock Stories. Yep. We recorded and we published it for you on New Year's Day. We brought you our first podcast of the year 1/1/20. Stock Stories: Vol IV. After all, a lot of the world likes to talk about story stocks, but we like to tell stock stories here at Rule Breaker Investing. We covered Etsy, Netflix, MongoDB and Lululemon. The second week was my traditional second week of every year, "My Biggest Losers." So, looking back over the last three years, my worst stock picks, volume 5. That's right, we've done it five times. The week after, Jan. 15, "The Day The Market Crashed." We'll be speaking about that in a little bit. And then last week was my latest five-stock sampler. That's right. It was The KonMari port, "5 Stocks that Spark Joy." And that all brings us then, therefore, the final Wednesday of this month, and it's our January mailbag. 

I usually like to start this episode with a few hot takes from Twitter, and that's what I'm going to do right now. @mr_jameelah7 said, "Listened to an interview with @Chris McDougall on @RBIPodcast. Decided to read Born to Run." This is reminding me that last August, we did "Authors for August," and had Chris McDougall on to talk about his work, particularly Natural Born Heroes. But the reason I'm reading this, Jameelah, is I love that you went on to read some of his other work after encountering Chris here at Authors for August. You go on to say, "Was expecting a documentary-type book about running. Instead, I found a great true story with great characters. I enjoyed it very much and strongly recommend this book. #Foolon." Well, Thank you, @mr_jameelah7. I'm sure Chris McDougall in particular thanks you, since you're promoting some more of his work. And, yes, just last fall, Chris came out with his latest book, Running With Sherman: The Donkey With the Heart of a Hero. That's right, Chris, running with a friend who happens to not be human, happens to be a donkey. Haven't read that one yet, but what an interesting and compelling writer, especially for people who love to run. So thank you for that.

I also want to highlight @profrooney. You wrote, "Every loser is a learning opportunity. I'm glad you do this, not just for transparency or schadenfreude, but to let us all know that you can do well despite making picks that are bad in retrospect." And Tom, you're reacting to David's Biggest Losers: Vol V. Thank you very much for saying that. Yeah, there are lots of lines about winning and losing. One of them, you either win or you learn. I think you're channeling that, Tom. But I appreciate that. For me, I think the reason it's important to talk about losing is that it happens all the time for you if you're an investor making a lifetime commitment to the stock market. We're going to talk about that a little bit later. But it's critically important to talk about that and to share it and make it clear that's part of the game. Even the best hitters in baseball history had more strikeouts than home runs. That's really important to note, and anybody who comes into investing not realizing that and thinking they have to be perfect, probably setting themselves up for the wrong mental framework and ultimately, maybe not great performance. So, yeah, you've got to lose to win. Thank you, Tom Rooney!

Now, before we get started, I want to highlight one thing. I know this doesn't work for everybody because this is a greater Washington, D.C., area offer. But next week, on Tuesday, Feb. 4, John Mackey, the founder of Whole Foods, the CEO of Whole Foods, is coming to Washington, D.C., to do an event for our Conscious Capitalism D.C. chapter. It's at 6 p.m. at the National Press Club here in Washington, D.C. It's going to be a wonderful evening. I can give all of my listeners a 50% off our ticket cost by using the code RBI. I'm going to ask my producer, Rick Engdahl, to put in our show notes this week. If you are in the greater D.C. area and you'd love to join us, 50% off a ticket. We'd love to have you. We're going to put the URL right in the show notes. You can click that. I hope you'll join us. I look forward to meeting you.

All right, well, without further ado -- oh, my good friend Chris Hill is in the studio. Chris, welcome back! 

Chris Hill: It's good to be back. 

Gardner: I mean, it's strange for me to be welcoming you to the studio because you spend a lot more time in here than I do. But Chris, welcome!

Hill: I always appreciate the invite, and the welcome. And unlike the last time you and I were in the studio together, I don't know about you, but I checked the market right before I came in the studio. This is not a drill, David. It's actually plummeting right now! This is not a drill! Sorry, I couldn't resist. 

Gardner: So, one of the things about doing "The Day the Market Crashed," which was Jan. 15 of this month, Chris, is that were conscious that it was not a live news show. I would have still been OK with doing that. I mean, Orson Welles seemed to do it successfully, memorably, with War of the Worlds. That was live radio. But we knew that this was a taped podcast, and I even tried to lead off the cold open at the top, making it clear what we're doing. 

Hill: Which a couple of people skipped.

Gardner: Yeah, in fact, I wanted to share some. Let's talk about some of the tweets we got this week, Chris. [laughs] One of my very favorites was "@RBIPodcast and @TMFChrisHill, you guys made me do a double take, actually more like a triple take, all because I skipped past the intro, LOL." My favorite thing about this tweet is it comes from Don't Be Skip, @dontbeskip1. Like, don't be skipping! But he did! He's probably not the only one. Some people were still surprised by what we did.

​Hill:​ I think so. I'm not surprised by that just because, when I listen to podcasts, there are some podcasts where I will skip the opening couple of minutes because maybe it's an interview with someone I'm interested in, sometimes it's a comedian who has a podcast, and their opening every show is, "Here are my upcoming dates." And I'll just hit the fast-forward button. I'm not interested in that; I just want to get to the podcast. So it was delightful to see, but it didn't surprise me that there were some people who were like, "Wait a minute. I skipped that."

Gardner: We want to make it very clear, Chris. You never skip ads, right, when you're listening to podcasts? You would never skip the ad.

Hill: That would be rude. It's a free podcast. The least I can do is listen to the ad.

Gardner: Thank you very much! Now, other reactions we got from the Twittersphere. @austinlieb, Austin Lieberman, our friend, and I believe Austin is a contributor to The Motley Fool, so this is maybe a little bit of a homer tweet. But I don't want to say that all, because, Austin, this seems very sincere. You wrote, "This is probably the best and most important investing podcast I have ever listened to. Bravo Chris Hill, David, @RBIPodcast."

Hill: It was very nice. I thought the same thing when I saw it, I thought, that's a very genuine sentiment. Certainly, most of the podcasts that I do, which are news-based, don't have a particularly long shelf life to them. Some of the interviews, do but the content of the news day-to-day, week-to-week, isn't necessarily something that holds up a month later, two months later, that sort of thing. I do think that, to Austin's point, this is something that, to the extent that people feel like they want to share something with people who -- every once in a while, you'll see it on Twitter "Does anyone have any investing podcasts?" I feel like not only is it nice when they recommend Motley Fool podcasts, but I think the episode of your podcast that we did is imminently shareable.

Gardner: And I hope people will. Whenever the market does have a bad day or week, I'll probably just go back and listen to it myself once again, just curious whether we got it tonally right. It's hard to feel as if the market is down 25% over the last 24 hours and be that and do that when you and I and a lot of our listeners knew that simply was not true.

Hill: No, but -- I won't speak for anyone else -- I know that I tried to think back to 2008, 2009. And that sense of, my insides are caving in a little bit, the bad news is coming from all corners so fast that in late 2008, it was hard to process at times. So that's part of the feeling I was trying to channel, that dread, almost.

Gardner: Yeah. And I think you nailed it. At least Did for Derek Main, who tweeted @dmainc21. Derek said, "I know The Day The Market Crashed episode was fake and all, but I couldn't help but get chills and feel like it was actually happening. Well done, David, Chris, RBI podcast." I'm reminded when he says chills that -- Chris, what is your first initial and your last name when you put it all together?

Hill: C. Hill.

Gardner: Is that your Motley Fool moniker? No, you're not.

Hill: No, I'm TMF Wizard.

Gardner: Why wouldn't you be TMF Chill?

Hill: I don't know. Maybe I'll change it. Is it available? Maybe I'll change it. I probably should.

Gardner: [laughs] But, I'm glad, Derek, that you felt that. That was really what we were shooting for. Jesse Wood, @jesse_wood, said, "Thank goodness I didn't skip the ads and introduction for the latest RBI podcast with David and Chris. I might have been in for a little shock. The Day The Market Crashed was excellent. That was pretty good acting. Was that off the cuff?" Now, Chris, I am not an improvisational comedian. I've done some improv. You almost can't get through society these days without doing some improv. Even in the workplace, we have stuff like that here at The Fool. But, Chris, you are somebody who's done improv, and it seems like you convinced Jesse.

Hill: A lifetime ago, I did some improv. But to Jesse's point, and Derek's tweet as well, it wasn't just you and me who helped prepare this episode. I relied on a number of investors inside this company, people who work on your investing team. I thought, "Well, what's the best way to do this? I'll email everyone." And I sent this email to probably half a dozen people or so, and laid out, in ways that I thought were very clear, what were about to do.

Gardner: Did you fool anyone? "Wait, Chris, the market crashed?"

Hill: Proving that I'm an even worse writer than I am a speaker, nobody understood. I had to go desk by desk to explain to people, "This is what we're doing." And once I did that, they understood. And they were very helpful. I basically said, "Look, pick a couple of stocks in David's universe and think about maybe not a doomsday scenario, but a really bad scenario, something that is plausible, and would result in a stock dropping 30% in a single day, that sort of thing." And so, that's where we get things like the breaking news about Stitch Fix -- or, I should say, the breaking news affecting Stitch Fix, in which case Walmart buys Trunk Club from troubled retailer Nordstrom, and all of a sudden, it's not unreasonable to think it would have that kind of effect on Stitch Fix.

Gardner: Yeah. And it is, in fact, not unusual, frankly, that one of my stock picks, especially some of our raging Rule Breakers, might drop 30% in a day. That's happened a bunch of times over the last year, in part because we have a few hundred stocks under coverage. But I think what was remarkable and important about The Day The Market Crashed is, it wasn't just that it was Stitch Fix down 30% -- which, by the way, it wasn't. I think we need to keep saying, we're talking about something that's not real. We're talking about a podcast we did two weeks ago. If you skipped to this point, please know we're talking about something that didn't happen, The Day The Market Crashed. But, Chris, it wasn't just Stitch Fix crashing, it was actually that all of the stocks, basically everything, was down. Apple, Netflix, Amazon all down 30% or so, which has happened in the past and probably one day will again.

Hill: Absolutely. Look, for as much fun as I like to poke at the permabears, the people who seem to make a living out of going on TV every couple of weeks and saying, "Well, now the end is really coming," I did try to incorporate some of the underpinnings of, well, what could happen. And, again, to go back to 2008, 2009. If you see a massive institutional pulling out of money, combine that with some orders don't get filled immediately, and it happens late in the day -- we were making it up for the podcast, but some of the things we talked about were taken straight from history.

Gardner: Well, and I'll throw out one more here. This is Warren Chapman, @businesssnide. There's some great Twitter handles among our listeners.

Hill: That's a great one.

Gardner: @businesssnide. Well done, Warren. He was responding to Austin, saying, "Agreed," that means he loved the podcast, less than a year into investing and never experienced a crash when my money was in the game. Made my stomach upset and it wasn't even real. Will help me prepare strategically, but more importantly, mentally."

Hill: That's music to my ears, and I'm guessing to yours as well, because --

Gardner: That's why we did it.

Hill: That's why we did it. We've been in this long enough that we vividly remember 2001, we vividly remember 2008, 2009. And while it is great to see people who are new to investing, not just joining The Motley Fool, but joining the pursuit of investing in the stock market over the last one, three, five years, in the back of my mind, I've always had this thought that, "OK, this is great. This is great that these people are doing this. I really hope they're OK when the next crash hits."

Gardner: Yeah. Last thing I want to say about this -- Chris, thank you so much for joining with me. I'm going to have a question for our listeners before you go. But I just want to add that market crashes in a single day like the one we simulated a few weeks ago are really not that bad in this sense -- if you're saving money on a regular basis and putting it in every two weeks, which I sure hope, if you're a wage earner, you're doing, putting it in funds or stocks or whatever. I like to invest in stocks directly, and I think everybody knows how I like to invest. But that just means that a few of those weeks, you're going to really take it on the chin for that one day. But then, that very next week, you're going to be investing at much better prices than you had the week before. And so, you're steadying and taking out timing. What's really bad is not a bad day on the market, which we simulated, but prolonged negativity, decline, when you're really losing time. So, when it happens really fast -- ironically, people live in fear that most of all, and yet that's not nearly as bad as an 18-month drop of 40%, where the money that you put in week in, week out, keeps going down.

Hill: Absolutely. And I think that's another thing we haven't seen for a while. We will surely see it again at some point. I don't know when, neither do you, neither does anybody listening, and, for that matter, neither does anyone who's going to go on TV in the next month and say that they know! But, it is all the more reason to keep investing, to stay in as long as you can. I think I've hit this point before on MarketFoolery, but don't blame the headline writers. Or, I should say, I never blame the headline writers. They're just doing their job. When the Dow is down 400 points, even though on a percentage basis, that's minuscule --

Gardner: "Dow Down Hundreds of Points Today!"

Hill: Yes. Do you know how big the Dow is? Do you know many tens of thousands of points it is? But I don't blame the headline writers. They're just doing their job. It's all the more reason to dig a little deeper, look past the headlines, and this is part of why we invest.

Gardner: All right, Chris, I always have the feeling you're one of the busiest guys around Fool HQ, so I'm going to let you go. But before I do, I want to say thank you very much. That was a lot of fun to do together. We don't do enough stuff together. So, I'm going to put it out to our listeners, is there another prank, hijinks, or partnership that you'd like to see between Chris and me, get Chris back on Rule Breaker Investing sometime this spring or summer? Is there a sequel? We don't want to cry wolf, maybe, more than once. But, yeah, Chris, and maybe if you have a thought. Let's do something more together.

Hill: I would love to do that. And I will just add, to pull back the curtain a little bit, because I mentioned the prep I did with the members of your investing team -- there were absolutely things that you did not know I was going to say. And there were specific things -- in the case of Stitch Fix, I said before we started recording, "There's going to be breaking news about Stitch Fix while we're recording. I know what the news is, but I'm not telling you right now. We're going to treat this as though it's actually breaking while we're recording."

Gardner: Make it real.

Hill: And so, to the extent that that informs suggestions from your listeners in terms of ideas that we could execute, go for it.

Gardner: So, if anybody has a good thought about what Chris and Dave should do some other time in 2020, maybe that's next month's mailbag.

Hill: Road trip? Buddy cop movie?

Gardner: Are you the good cop or bad cop? Are you the young or old one?

Hill: Ironically, I think I'm younger than you but, I project older and crankier.

Gardner: No, you're the good-looking young cop. I think I'm kind of Peter Falk. I think Columbo. I'm going to be Columbo to your --

Hill: Dantana? Vegas? Oh, it's a good thing it's an audio podcast.

Gardner: [laughs] Thank you, Chris.

Hill: Thank you.

Gardner: All right, mailbag item No. 2. And, thank you for writing this note, Aaron. This comes from Aaron. "Hi, Dave. I was introduced to the Motley Fool in 2014 via The Motley Fool podcasts. Prior to that, I'd purchased one individual stock and invested regularly in index funds. I officially became a Stock Advisor member in November 2014, and I've remained so ever since. Over the course of my first year of membership, I've built a portfolio of 10 stocks, most of which were among the starter stocks recommended on the website. Since that time, I've added many new stocks to my portfolio. In 2015, I started an investing journal to write down notes about stocks I wanted to add to my watch list. In July 2018, I also became a member of Rule Breakers. I've added a couple new stocks to my portfolio based on that service's recommendations.

"Since December 2015, at the end of each year, I sit down with an Excel spreadsheet to calculate the performance of my investments and compare their performance to the S&P 500 over the same time period. Since 2015, my portfolio has never been more than 1% better than the S&P 500, which it is this year. But most years, my performance has been a few percentage points worse than the S&P 500. This underperformance is further magnified by the fact that I invested in one of my best performers, Apple, two years before I became a Fool member. If I took out that one stock, I've been beaten by the S&P 500 soundly over the past five years. I've been frustrated as I calculate my results each December, but I recognize I am early in my investment journey."

Aaron goes on from there to assert some more things. He says, "I believe in the Foolish philosophy of investing. I'm not a stock trader, I am an investor. I've only ever sold one stock. I have no intention of selling any of my current holdings anytime soon. I've tried to be thoughtful and patient in my selections. I look to invest in companies that I consider good, both from a financial standpoint and from a Conscious Capitalism standpoint, and I do my best to not overreact to headlines." And he goes on and he says all of the right things.

Toward the end, Aaron concludes, "I've spent the last several months feeling like a Fool failure. But then I begin to wonder if I'm really all that unusual. Looking across the Stock Advisor and Rule Breakers scorecards, among the many great winners, there are certainly a lot of stocks that have lost to the market. So, my question, do how many of your Motley Fool service customers actually beat the market? And if you do have that information, have you done any analysis as to why some do, and some don't? I want to make sure you don't feel I'm complaining or criticizing in any way. Though I have not had market-beating returns, I've certainly learned a lot about investing. I've also been encouraged to invest more than I would have otherwise. And for that, I am richer. I've also not lost faith in the process. As I said earlier, I'm not selling anytime soon. I still have hope that my investments will beat the market over the long haul. Thank you for your time! Fool on, Aaron!"

Well, I started that read by saying thank you for writing that note. Aaron, thank you for sharing that. It's frustrating, isn't it, to put in the time that you've put, and paid the money -- in some cases, to us, for our advice -- and then feel as if you're not actually being rewarded for it. Because, after all, as I'm the first to say, any of us could buy the index fund, mail it in with the gentlemen's C, and do just find. Jack Bogle has demonstrated that through the course of his long career and his long life. He showed us all that you can just buy the indices, save and invest regularly, don't jump in or jump out or get scared by market downdrafts, and you'll do really well. And sure enough, I think you're on that path, Aaron. That's my first thought for you, is, what you're doing is great. You've put in a lot of time to build a portfolio. There was more information in your note that I didn't share because of the length of the note, but I know that you have a lot of stocks. So, you've got a full portfolio. And it's not like you're dramatically losing to the market. And, as you mentioned, you're actually up. So, the more money you put in, the richer you've gotten, because you've been inspired to invest. But you're frustrated that you're not beating the market, because sure enough, that's what I've dedicated my career to, is to helping people beat the market. And whether it's through paid services like Stock Advisor or Rule Breakers, or this podcast, which last I checked was totally free, I and so many of us here at The Motley Fool -- we have about 400 employees these days -- we're all working for you, Aaron, to be beating the market over the course of time.

So I'm going to say, I think you are on the path. I think you're right that if you just stay with where you are, don't do anything crazy, keep saving and investing, you don't probably have to buy that many more stocks, you can probably just add to existing positions -- I think you're going to be really happy that you got Foolish in November 2014.

But I will close by saying, at the same time, I would encourage you or anybody listening to cancel our services or any other if you're investing in the service based on the premise that you'll beat the market. The good news is, I think enough people do that they resubscribe from one year to the next. And I think The Motley Fool has prospered co-creating prosperity with our membership. But I'd be the first to say, if your goal is to beat the market, and for whatever reason, you're not picking the Stock Advisor or Rule Breakers stocks that are getting you there, then don't keep paying us.

Maybe the last last thing I want to say for now, Aaron, is time is your friend. Very often, if you look at what happens with money compounding over time, it starts to hockey stick by years 10, 20, by year 35. 35 years from now, you're going to watch, all of a sudden, you're going to be amazed by what happens through the power of compounding returns. And one of my beliefs about investing is that you can lose quickly and early in a way that you'll never win quickly and early. I have a lot more stocks that will open up down 30%, as I just talked about with Chris, than open up 30% on a given day. So, I think in the short term, measured by just a few years, underperformance, sometimes dramatic underperformance, is not that uncommon. But over the long term -- and I mean the long term, like your lifetime commitment to investing -- pretty sure if you leave those winners in place, you're going to be really pleasantly surprised by what happens with your portfolio going forward.

Anyway, thank you for sharing, for all your efforts, and we wish you the very best.

And as I welcome my next guest, Max Keeler -- Max, great to have you back to the studio this month.

Max Keeler: Thank you, David.

Gardner: As I welcome my next guest -- you put on your headphones, Max -- I'm reminded that I do talk a lot about success and winning. Max, what winners do?

Keeler: Winners win, David.

Gardner: That's right. So, it's very natural, and it's an important lesson that I hope we're constantly conferring. And it's a long-term win we're always talking about. But it's very easy to sometimes think, "Well, everybody must be winning all the time. Everybody using their services and listening to the podcast must all be winners." If you feel like you're not, impostor syndrome as a listener of this podcast, I want you to know, we're all losing all the time. I've tried to make that really clear throughout this month of January. But it's a real truism. Max, I know you and I are both investors. In fact, have you owned some Amazon stock at some points in your life?

Keeler: Oh, yeah. Yeah, I bought Amazon a long time ago, and it was down for the first five years that I had it. [laughs] And now it's not.

Gardner: That's really inspirational and important. In fact, we got a great tweet -- I didn't share it this this week on the hot takes portion, but we got a tweet last week from somebody saying, "Hey, great job highlighting Tesla." Everyone knows if you're following the market that Tesla has been an amazing stock over last three to four months. It's more than doubled, and it already had a massive market cap just a couple months ago. Anyway, I think it was Austin Lieberman, our Fool friend. I think Austin was saying, "It's really important, though, that people know the true investing journey of Tesla in Rule Breakers." We recommended it in 2011. It went up about 6 times in value over the next two years, which was amazing. 2011, 2012, 2013. Then, for five years, the stock went sideways. It went up sometimes and then down others. It had no creation of value. 0% return basically from 2013 to 2018. Though, the stock market had a great five-year return. If you were judging Tesla over those five years, you're like, "What's up with this?" But we got that initial six-bagger, we went sideways, and then in just the last few months, we've watched it more than double again. And the overall story is an amazing one. It sounds like winning, but you had to lose quite a long time in order to get that win. And Max, you just said it with Amazon.

Keeler: Yeah, and also, as a Tesla stock owner, so many times, I've thought, "Well, maybe I should dump this while I'm ahead." But every time I've done that, particularly with a stock that I believed in, I don't think it's worked out. So, yep, the holding keeps on giving, for sure.

Gardner: I didn't know you owned Tesla. That's great. There you are. Anyway, Rule Breaker mailbag item No. 3. Max, you are running Investor Island, our mobile game. You've talked some about the game. You gave some previews a few months ago. I wanted to have you on in part to respond to this mailbag item, but also in part to talk about what's coming to Investor Island in February.

Keeler: OK.

Gardner: All right, we got a note from longtime correspondent Bill Housley. His note was actually about stocks that spark joy. Thank you for that, Bill. That was, of course, my five-stock sampler for last week, which I hope everybody enjoyed, and I hope those stocks beat the market. But his post-script to his note was this, Max. He said, "Do you have some strategy recommendations for Investor Island, because I am really bad." So, I thought, let me have you on briefly. How about three tips to up Bill's game in Investor Island? Maybe the first one would be obvious, Bill might already know it, but maybe not. But maybe by the third, we start to get to something really subtle and important for experts to know. So you're going to level this all up right now, Max. No pressure at all, but how about three ways that Bill can get better at Investor Island?

Keeler: Bill's not the first one to contact us about some strategy tips. Something we hope to do in the next month or so is put together a little YouTube video so that people can see this and share with their friends. Just a few little tips to get good at Investor Island. A few that come to mind. First off, battle the bot for a bit until you're ready. When you're battling the bot, what you want to do is go quick for gem tiles. Gem tiles from the get-go. Sprint toward them. The bot is not going to go for your temples early, so occupy gem tiles and then let those accrue.

Gardner: All right, now, I know not everybody knows our app. But just to make it clear, there are a few different modes of the game. You can play head-to-head against somebody, historically or live. You could also take on the AI, or, as you were saying, the bot. And you're also talking about the importance of finding the resource generators. In our game, it's gems. So, getting those resources to build your economic engine, sprinting for those, you're saying, works well against the bot in particular.

Keeler: Yep. And then, once you get that, another tip --

Gardner: No. 2?

Keeler: No. 2 is, upgrade your temples early in the game.

Gardner: I don't do that enough.

Keeler: Doing them later in the game, it's not going to help you out as much because just like investing, the earlier you invest, the more you'll get those compounding returns from your temples. So, invest early in your temples.

The third is more about spell selection. One of the spells you'll unlock relatively early in the game, might take you a little bit of time, is the lightning bolt. The lightning bolt, as you know, David, is a very good offensive spell. So, you're going to use a lightning bolt against the bots particularly to carve your way to the opponent's temple and then knock out a temple, one temple at a time. With a bot, I would always go for a knockout win, rather than an attrition trophy win with the bot. Be aggressive, go early, and you'll win.

Gardner: Outstanding. Well, coming from somebody who's highly rated, and is also leading our team that's making this game, Bill, I hope that's helpful. Max, thank you for that. Maybe tease a little bit about what's coming to the island in February.

Keeler: Investor Island has been out and about really since December in the U.S. We have about 25,000 people who have downloaded the game. We have a pretty active user base. There are about 1,000 duels played each day, even more against the bots. So, there's a lot of action going on in Investor Island. Get in and play. For our players, we've got some neat stuff coming. I'll tease two that are coming very soon and one that's a little bit more in the distance. The first are, we've got two new spells coming, and this is going to change things. Spell No. 1 we've called Revive. Essentially what that is is, it gives any statue a second life. So, once that statue is destroyed, it will pop back up, keeping all of its upgrades if it had been upgraded, with one caveat -- it'll have half its life when it comes back.

Gardner: Otherwise, that'd be a little overpowered.

Keeler: Exactly. We're always trying to balance these things.

Gardner: That definitely will change some of the dynamic of the game. Now, for people not familiar with the game, there are spells on Investor Island. You can only bring a few of them in your spell book. You have to choose ahead of time whether you want to bring Lightning Bolt or not. There are more spells than you can bring into a game. So, we're about to add even more spells than that, and change up some people's strategies, I suspect. I haven't gotten to beta test Revive yet. I like to just download along with the rest of us. I'm among your players here. I don't know what you guys are hatching. But, Revive sounds good. What's the other?

Keeler: The other one is called Watch Tower. It's a visually neat spell. I think you've seen some previous of it, David. There's a little eyeball that hovers over your statue and is constantly surveying the area. That's the idea, is that when you cast Watch Tower one of your statues, what it will do is it will make it so that if an opponent builds near that statue or next to that statue, your forces will attack first. So, it is a way to defend yourself while you're away, which is particularly important in our live mode of our game, and is also very powerful in the dual as well.

Gardner: All right, that sounds awesome.

Keeler: Watch Tower and Revive, coming to Investor Island in the next week.

Gardner: Before I let you go, Max, you did hint at something that's a little bit more distant but that you're working on. Do tell.

Keeler: We're really excited about this. We've gotten a lot of feedback from our players, particularly our podcast listeners. Thank you very much for playing and all the great reviews. We're highly rated on the App Store. One of the pieces of feedback is, "This is fun. I like it. It's quirky. I love the game. It has a pretty tenuous connection to investing." And we'd be the first to admit that, while there are some investing lessons in there that you may not see at first, it's not a strong connection. It's not a market simulator or something like that.

Gardner: By design.

Keeler: Yes, by design.

Gardner: It's a game.

Keeler: It's a game first. But we've added what we've called the meta game, which is the game above the game, the reason to play the game, is what we call it. Like, collecting stocks is part of the meta game. But, we've added an investment portion of our meta game, where you can actually invest your own in-game currency into the stocks into your collection, and then get the returns from that. It's not quite as simple as that. We're still refining it. But we think players are going to really like it. It's going to be a lot of fun, and be a little bit more connected to the market, which, I think, particularly our podcast members will enjoy that.

Gardner: Excellent. Yes, that is exciting. So we're bringing even more invest to Investor Island, sometime ... are you going to say in the next month? Maybe March?

Keeler: If there are any software developers out there, you know what I'm going through right now. In the next quarter.

Gardner: All right, that sounds good. Max, thanks for joining me!

Keeler: Thanks, David! See you next time.

Gardner: All right, Rule Breaker mailbag item No. 4. And this kind of fits with what Max just talked about. This comes from Davor Baros. Thank you, Davor, for this note. It's kind of investing as a video game, is how I might entitle this. Love this. Here it goes. "Hi, David. Longtime listener of all Fool podcasts. About a year or so, Rule Breaker Investing and a Stock Advisor member as well. I wish I started listening to your podcasts and got the services and became a Fool sooner in my investing career. I would have hopefully actually listened to your advice and avoided my early investment mistakes. These early investment mistakes bring me to a story about my younger brother, nine years my junior. Now, about two years ago, he and his wife finally got to a point in their lives, after having two kids and getting a house, where they started thinking about investments. The year is 2017, and Bitcoins and pot stocks are all the rage. He asked me for advice about getting into those two areas. As you can imagine, as an investor, my advice was to stay the heck away as he will be gambling and that he's also a little late to the game. It's OK to gamble, but understand that you are gambling. Don't pretend you're analyzing anything. Sure enough, he didn't listen, and that did not work out so well. In retrospect, probably a blessing. This is the point where he started asking me more questions about investing. I told him he needs to build a base first, focus on secure dividend stocks and ETFs and learn slowly. Luckily, his wife listened to the ETF advice and started putting the bulk of their money into them. He didn't. He's still looking for a Hail Mary. He's flipping IPOs, buying stocks that are potential value traps. The frustrating part is, unlike me, who had to learn all this by myself, he has me to guide him.

As he's a gamer, I got inspired by last week's Industry Focus: Wildcard podcast with Aaron Bush talking about the video game industry. I came up with an idea on how to break it down for him. I thought I should share it, as it might be useful to some of your listeners. Plus, I thought you might appreciate it as a gamer yourself," and indeed, I do, Davor, and that's exactly why I'm presenting this as mailbag item No. 4 this week. I think this is pretty great. "Investing is like a real-time strategy video game. You typically start with a small village and very little resources and credits. You also get some monthly additional credits. This is the money that you have available to start and invest monthly. Now, the very first thing you do to build up your village is sending workers to build farms and mine for resources so you can get more credits, which means you start by buying dividend-yielding ETFs and stock aristocrats. When the first farms and mines start producing, you build more farms and mines, which translated back to investing says you buy more ETFs and dividend stocks with the money that you were making. Once you shore up your village defenses, production is ticking and the village starts to turn into a small town, you start building up an army, which would be the equivalent of starting to buy non-dividend stocks with good track records. And once you have a solid army built up," you can picture him saying this to his brother, the video gamer, "then you can start developing your hero units, which are the equivalent of high-growth stocks with high return potential.

"Now, if one of your army or hero units is always winning battles, and the other is always losing them, in which one do you want to invest your credits and resources to upgrade their gear? That would be kind of like looking at your stock winners as heroes. And when they hit some percent gain, invest more into them, let's say, to level them up quicker. What do you do when a farm or a mine is not performing? Do you keep on sending more workers to keep working that farm? Or do you just scuttle the farm or the mine and send them working on a higher-yielding location? Of course, this is what you do with your losing stocks. If you stop believing they're going to turn around, be brutal and understand the time value of money.

"Finally, in conclusion, once you truly develop your game, and are a seasoned, high-level player, the initial struggles are a distant memory. You are amazed that you can pop more in one day than you ever did in a year when you first started." I'm just channeling this; this is really written for his brother. He closes, "Dear brother, what you were doing right now is, you're putting all your limited resources into wrong hero units. Your understanding of the game is lacking, and sure enough, your units are dying."

OK, so, the reason I wanted to share that is because whether, dear listener, you are a video gamer or not -- I know a lot of you are; I certainly am -- everybody knows a video gamer. And what a wonderful thing to send to your friend, this podcast, just the last four minutes. Because any video gamer, really through Davor's understanding of how civilization games work, any video gamer now understands how they should be investing, and I would say investing Foolishly. So, Davor Baros, thank you for that. He said, "Hope this helps. Please keep on being Foolish for a very, very long time" Well, we intend to do that. Thank you, sir.

All right, Rule Breaker mailbag item No. 5. And oh my golly, I have another special guest. Buck Hartzell, welcome to Rule Breaker Investing.

Buck Hartzell: Thank you for having me, David! I appreciate it.

Gardner: I am so delighted to have you, Buck. I'm not sure we've spent that much time together on this podcast, even though we've been at the same company, working sometimes together, for a long, long time.

Hartzell: A long time, over 20 years, and I think this is my first podcast with you.

Gardner: I'm delighted to have you here. Actually, shame on me that I hadn't had you two years ago. But Buck, here you are now. If you would, briefly describe what you do at The Motley Fool.

Hartzell: I'm an analyst. I've been here 20 years, so I've done a variety of different jobs. But one of those was building an analyst development program here. So, a lot of the folks that hopefully appear on this show and program, I helped develop at one point in time along the way. And now, I work on a variety of different services, mostly in Canada. If you guys are joining us from Canada, you might know me. Most recent pick in Stock Advisor Canada came from me. But, I also throw ideas to other services, so you'll see my stuff show up around The Fool.

Gardner: Buck, you're one of the best read. We have a lot of good readers here, but you have pretty voluminous knowledge, I think, of the markets, and you have wide ranging interests. I have to admit, I didn't even realize that the most recent Stock Advisor Canada pick was yours. Look at you go.

Hartzell: A wide variety of stuff, but I think everybody here has an interesting knowledge base. That's the fun thing about working here at the Fool.

Gardner: Well, thank you for joining me, Buck. I've got a few ideas to share. I'd love to hear your thoughts about them. Ready?

Hartzell: Sure.

Gardner: Awesome. Let's start with mailbag item No. 5. This is from Michael Shepler. "Hello, David. I'm a 37-year-old nurse practitioner who's making good money for the first time in my life." Congratulations, Michael. "The past couple years have really started shifting my mind and goals toward investing, especially after selling a house and paying off all my student loan debt, huzzah! I've been listening to Rule Breakers since July, bought Stock Advisor in October, Rule Breakers last month. I find myself feeling so behind and late to the party. It's difficult to think another Netflix or another Amazon could be on the horizon. But I am hopeful. I'm actively investing almost $2,000 every month. I moved over $20,000 from a 401(k) to an IRA. I've been picking stocks based on your services. I'm up over 10% in my portfolio in that amount of time, but I've definitely made some big mistakes by fear selling, based," he actually says, "in part from articles The Fool had put out about companies."

I'll say this, we write a lot of articles every day, and they come from contractors all around the world. We encourage people to take both sides, right, Buck?

Hartzell: Yeah, we're a motley group, right? Everybody has different opinions. I think there's a lot of folks, particularly that are newer in our services, that think we have a company line on every stock. We don't. We all have different opinions here, and we celebrate that, and we share them all, and then it's up to you to come to the truth that works for you.

Gardner: That's right. And especially as a newer investor, Michael, I could see how you might have taken too seriously something said, I don't know, negative about a company. We're all learning. He does say, "My biggest mistakes were selling Shopify at $312 and Netflix at $298," but he felt like if they plummeted back to Earth, it would have hurt him too much, Buck. He did say he was mistaken.

But here come the questions. Basically, he goes on to say that a lot of people think the market is waiting for a big drop. I've already made that a focus of this month on the podcast, and certainly this week's as well. Michael says, "I know we've been in such a bull market for so long, I'm terrified of wasting another year of big gains. But I'm also fearful of watching my investments be chopped in half and not having the liquidity to capitalize on a down market." So there's two questions, real quick, Buck. First, with all the fear mongering in the market, how do you stay the course with stocks that seem so highly valued?

Hartzell: Yes. We're 11 years into a bull market here, and we have a lot of people that are waiting for the drop. All I can tell you, Michael, from my past experiences, and we've had people that come on in 2008 and 2009, I remember posting in discussion boards saying, "I was smart enough, a couple months ago, I sold everything." I rarely hear those people come back and say, "I bought back in now." The hard thing about timing the market and getting out is, you not only have to get out at the right time, or you give up some of those gains you talked about, but the harder part is getting back in. You have to be right twice. So what we do instead is what I think you're setting up to do, Mike, which is a great idea, is dollar-cost averaging. It's taking that $2,000 a month, putting it into some of your best ideas every month, and then, if you look at the market as it goes up and down, as it goes down, that same amount of money that you're putting in is buying more of those wonderful investments in companies that you like and want to hold for the long term. And by the way, the money we invest in those stocks should be money that we don't need in at least the next five years. If you need it for something -- buying a house, buying a car -- it should be in cash or CDs or something else. But the money that we invest in stocks is long-term investing. And when you look out five or six years, those bumps don't seem as bad as they do when you're going through them at that time.

Gardner: Straight Foolishness, chapter and verse. Few can deliver it better than Buck Hartzell. Buck, you've not just lived this, but you've taught it and you've conveyed this so well to all of our analysts. And, of course, it flows through everything we do here at The Motley Fool. But some contracting writers might not have liked Netflix or thought Shopify was overvalued. We're each making our best decisions, right? There's no party line.

Hartzell: That's right. I would say too, to some folks, if you have been a long-term investor in these stocks, and you've made a wonderful gain, I'm not against some people selling off some of that and rebalancing their portfolios. To give you some general ideas, these are guidelines for folks, a good idea not to have more than 10% in one stock on buy-in. If it runs up and it's a 100-bagger for you, you might have more than that. But if you get uncomfortable with a position -- and the way I say that to folks is, if it drops 30% or 40% and it impacts the way you live your life, go ahead and sell some. That's OK to do. I would recommend you don't sell all of it, though, if you particularly like the company and it's doing very well. But selling off some from time to time is not a bad thing at all. 

Gardner: Really nice. The second question, how much do you actually recommend people keep in cash to capitalize on, let's say, a major opportunity like a recession? Michael concludes, "It would be really sad to not have much money set aside if another great stock came along."

Hartzell: Yeah, that's a very personal question.

Gardner: There's no one right answer.

Hartzell: There's no one right answer, but I'll give you some guidelines, and then I'll say a personal anecdote from something to work toward. You're very young, but maybe this is something as a goal to work toward. Generally, we tell folks to have at least six to nine months of living expenses set aside in cash. So, if something happens -- the furnace breaks, the car breaks, whatever that stuff is --

Gardner: Or you break.

Hartzell: Or you break, or you lose your job, or things happen, you have that money set aside. So, six to nine months living expenses, put that in cash. The longer-term goal to work toward here -- and I'll give you the end result of this -- is to work toward at a time where you're in retirement where you can have three years living expenses in cash. I managed my father's money for a long time before he passed away. Prior to 2008 and 2009, he was 100% in stocks. He had no bonds. He had a lot of dividend payers in there. The market went down in 37%. He had three years living expenses in cash. He didn't have to sell any stocks. We didn't sell anything. By the time that three years was over, he'd actually put some more money in and did very fine. So, I'd say, as a long-term goal, not at 37, Michael, but as you approach retirement, I found that goal, by the time I get there, when you're 70, or whatever age you consider retirement, having three years of living expenses in cash is a good goal, and that smooths out the bumps.

Gardner: A really nice rule of thumb. All right, well, this next one comes from Michael Badawi. Michael says, "Hi, David." Rule Breaker mailbag item No. 6. "Love the most recent podcast you and Chris delivered earlier this month. It was really interesting to listen to the types of news items and updates that might be discussed in a real crash and see how calm I felt, because my first reaction to all this was, 'Great, now what and how should I buy,; which is the basis for my question. I've been a Fool member for both your Australian and U.S. services since around 2012. I'm an avid listener to all your podcasts. I find the most important takeaway from the podcasts for me are around temperament. As an example, back in October 2018, the market started to drop quite aggressively." Do you remember the fall and winter of 2018, Buck? It was a brutal quarter.

Hartzell: December was particularly bad. I remember coming in on Dec. 26, I believe, to buy some stocks for my kids and myself because that was a particularly bad month.

Gardner: Wow. Well done, sir. I remember my portfolio declining 25% in that December and early January, and then the market really flipped in 2019. It was pretty special. But anyway, it's good to be reminded of those times. Anyway, the market started to drop quite aggressively. "The Fool's approach on MarketFoolery was to discuss a number of items around temperament. I believe this is something you do exceptionally well on RBI podcast and the team does in general." Thank you. Anyway, back to his question, which is around buying during market crashes and significant drops. Michael says, "I know The Fool's an advocate of regular buying regardless of what's going on in the market, as over the long term, we should benefit regardless of what's happening today." This is something based on our advice that he practices, too, he says. He's also aware that I previously stated that market crashes can last up to 18 months. Well, that would be more like recessions or bear markets. But anyway, the length of these is always different. But if, say, he has 5% to 10% of his portfolio in cash, Buck, and there is a significant drop or crash, what does the data tell us about how we should think about either adding to our favorite positions or new positions with the view that we'll never know where the bottom is? He basically asks, here's the point blank question, should he deploy all of his spare cash on day one of a crash, especially if it's like a 20% or 25% single-day drop; or, two, wait and see what happens and just keep regularly adding to his positions?

Hartzell: I love that you're thinking about this in advance, Michael. You're in Australia, so we wish you the best. Hope you're safe and everybody you love as well with all the fires that are going on there. But, I love that you're thinking about this in advance, and you're getting prepared. That's a great thing. In a quick nutshell, I looked up some stats. This doesn't include 2008, 2009. I looked back at an old article that I did. So. let's ignore that one. We had 11 bear markets since World War II, and the average decline is about 31%. And they on average last about 393 days. So, that's what we're talking about as average. Obviously, we've had a long bull market. It's been almost 11 years. So, it wouldn't be unreasonable to think that the next one might be a little bit longer or a little bit steeper than the average. But anyhow, that gives us a rough idea to work with. So, what I would do is, if you get in that situation, I don't think it all comes out in one day. I mean, it did on Black Monday. It was about a 25% ironic decline. I can't predict whether that's going to happen or not, but usually it takes a little while. So, I would take that 10% cash or whatever I had, and I would divide it by 12 to 18 months and put in equal amounts, equal installments, and pick your favorite things each month that you like.

Gardner: Really nice. So, again, be incremental.

Hartzell: Yes.

Gardner: So much a world where people think it's buy or sell, binary thinking. All in, all out. But Buck, you in your own practice, me in mine, and what we've said for years at The Fool, and we'll say years more, is it's about the gray, not the black and the white. It's about being incremental.

Hartzell: Yeah, absolutely. The other thing is, it makes it more fun. Because if you can win all one day, and you happen to be wrong, boy, that sucks, right?

Gardner: You'll be living with regret for probably years.

Hartzell: But now, if I do that over 18 months, and I make 18 different calls, or if I do two picks in those months and now it's 36 different calls, I feel much better about the chances I'm going to have some very good outcomes as opposed to picking that one perfect time. As they say, nobody rings a bell at the bottom, or the top.

Gardner: Thank you, Buck. Will you hang around for one more?

Hartzell: Sure.

Gardner: All right, one more. This one's from Bill Davis. This is the second last point of this Rule Breaker investing mailbag. Here it is for you, Buck. Bill says, "Hi, David. I know that being recognized as a Dividend Aristocrat generally means that a company has been strong and well run over long periods." Again, Dividend Aristocrats, a category, a label given to companies that pay regular dividends and have increased those dividends for years and years. And so, for people who like income from their stocks, they love the Dividend Aristocrats, Buck. I'm going to have you talk about that in a sec. But Bill goes on, "I'm interested in hearing stories about how companies stumble from that, how a company with a strong track record takes a turn and falls out of Dividend Aristocrat status. It seems like looking at several examples like this maybe you could provide some insight into danger signs looking at our own stock holdings. How about it?" Now, I want you to speak to this, Buck. But before you do, I want to say, I like this topic. Rule Breaker Investing doesn't really hunt for dividends, but I love talking about investing. I think maybe sometime this spring, we should do a dividend-focused Rule Breaker Investing podcast. Just a one-off so that we can talk some more. Maybe, Buck, you could rejoin me then.

Hartzell: Sure, that's great.

Gardner: But for now, what would be an example of a failed Dividend Aristocrat, and a little pattern recognition with that?

Hartzell: That's a great question. First, I want to give a little bit of context here, for those of you who maybe want to follow these strategies. I'll give you two investment ideas. If you go to Morningstar, you can actually type in SDY, and they have a fund for that tracks Dividend Aristocrats. That's their high-yield version. For those of you, right now, that's yielding 2.78%. Something kind of interesting -- they compare a fund to the category average there, right? The category average is 2.83%. So, 2.78% is actually less than the category average.

Gardner: So the Dividend Aristocrat fund has a lower yield.

Hartzell: Their high-yield Dividend Aristocrat fund is actually lower-yield than the average of the funds in that category. So, as you said, Bill, this is a quality indicator. It's a quality indicator, that these companies have been able to raise their dividends for at least 25 years. It doesn't necessarily mean that they're a high-dividend-yielder now. 2.87% is what you're getting from SDY. The other one is NOBL, like noble. You can type that in, that's the regular one. That current yield is about 1.89%. So, a little bit less there.

Gardner: So these are funds that somebody who doesn't want to buy shares directly, they just want to buy a fund that has these Dividend Aristocrats in it. That's the yield you could expect. And those are a couple examples.

Hartzell: Yes, exactly. There's a fee associated with those. I think it's 35 basis points, so about a third of a percent. You can look at what they have in there if you want to go in and recreate it yourself. You don't have to pay that fee. Or, if you want to pick out the stocks that you like. Now, back to the question about why these fail. I didn't have a ton of time before I came in here, but one of the ones --

Gardner: I tend, by the way, to invite my special guests 15 minutes before we do podcasts. That's a little-known fact about the Rule Breaker Investing mailbags. Dave is usually dropping notes via Slack just minutes before I'm asking you to come on and present data.

Hartzell: Right, exactly. And then I got the questions, and then somebody else said, "Hey, can I ask you a quick question?" Which turned into a little bit longer than a quick question.

Gardner: You should stop being so helpful.

Hartzell: I know. Well, I tried. Anyhow. We look at ones that failed. GE is one of those companies that has failed as a Dividend Aristocrat, and they had one of the longest, richest histories of paying increasing dividends. I think back to the 1940s, which is incredible. My guess is -- we haven't looked at all those. Maybe we'll come back and do that a later date sometime this spring. My guess is that mismanagement is probably pretty high on the list of why companies fail. And one of the other problems -- I looked at a couple of the common holdings in these different aristocrats. One was IBM, a company that isn't known for --

Gardner: Capital appreciation.

Hartzell: [laughs] Exactly, right. Hasn't done that well. They borrowed money, bought back a lot of stock, and they pay a pretty good dividend, but the stock has not done anything. They pay out about 65% of their profits each year as a payout ratio. ExxonMobil's in there, another company, obviously, they've been in the energy sector, known as a very good company, but in a very difficult sector right now. They pay out about 65%.

What happens, I think, over many decades and years is, as these companies go and they're paying out 65% to 70% of all their earnings, there's less money left over for them to reinvest in other areas and grow the business. And what happens is, I think a lot of those managers of those companies, they're probably not owner-operator, founder-led companies, they're professional managers. And it's probably easier for them to get disrupted as businesses. But that's a hypothesis. We haven't looked at all that. But certainly in GE, Jeffrey Immelt didn't have a great track record. He also made some pretty bad acquisitions at pretty high prices. It didn't work out very well. So, that's one anecdote.

Gardner: A great example. In fact, we're going to use our social media presence in the coming week or two. We're going to put a poll out -- should Rule Breaker Investing do a Dividend Aristocrat focused episode? Yes or no? As somebody who's a man of the people, who listens to the vox populi, if we see a greater than 50% response, we will do that episode. And Buck, if we don't, that means not enough people care, we will not do that episode. So, it'll be interesting to see whether the people want Buck back.

Hartzell: Power to the people. They can decide. I'll add one last thing. I know we're running short on time, Bill. One area that I prefer over Dividend Aristocrats is newer companies that have really strong balance sheets. Most recently, that's been Apple and Microsoft, those types of businesses, that hint or say that they're going to begin to pay a dividend. Those tend to increase their dividends at a much higher rate than inflation. So, some of those newer companies, even if it's before they start paying, I like those businesses more than I like the ones that have paid it for 40 years. That's a personal thing.

Gardner: The coming aristocrats. Well, I suspect the people might want to have Buck back, given what he just said, because we're not going to do some backward-focused look at IBM. We're talking about maybe the new aristocrats. If the people want us to go there --

Hartzell: The Foolish Aristocrats, we could call them. Future-looking aristocrats.

Gardner: Buck, at this company, you're an aristocrat. Thank you very much for joining in this week.

Hartzell: Thank you very much for having me. I appreciate it, David.

Gardner: All right. My final Rule Breaker Investing mailbag item, No. 8. And yes, I do usually try to save the best for last in every mailbag. I don't know if this is the best because there was a lot of good this show. But Jordan Hopper, you said this. "David, I'm a member of both Rule Breakers and Stock Advisor. I want to start by thanking you for the services. I started investing after hearing the story of the gentleman who started saving half of his raises as a young man. Then, later, when he and his wife were out to dinner with friends, he disclosed that they saved approximately 40% of their income. I started using a similar approach with my past few raises at my job. I'm happy to report I now own shares in about 20 different companies." Rick, throw me a record scratch.

[record scratch]

Gardner: I just want to stop it right there, because what I want to reshare in closing is that wonderful, money-saving story from Dave Gek to inspire you, dear listener. Jordan was inspired. If you don't already know this, I hope you'll be inspired, too, and to share it out. Here it goes.

Longtime Fool member Dave Gek wrote me a few years ago, "Back in 1975, one of my instructors took a few minutes to talk about finances. He had a recommendation. He suggested that when we graduated, we take $5 of our $625 per month that were going to receive as second lieutenants and do so without fail, without changing the amount, until we were promoted to First Lieutenant. He asked us how much would we have? Now, knowing it would take two years until we were promoted, we quickly figured 24 times $5 plus interest would be about $125. He commented that yes, it would not be much, but the goal of the first two years was to develop the habit of saving. He then suggested that upon getting a raise -- actually, two raises; one for the promotion and one for two years of service -- that we save half of the increase and use the rest to pay additional taxes and increase our standard of living. He pointed out that if we could make ends meet on a Second Lieutenant's salary in our 24th month, then we could make it during the 25th month on that amount plus half of the increase. He said to do this throughout our career, and we would have a sizable sum by the time we retired. It made sense to me. I did not have a career of military service, but I followed his advice with my civilian pay. When I was about 55, my wife and I went out with another couple and the husband asked if we'd saved anything yet for retirement. He said they were concerned as they had not yet started. I related the story of my instructor's suggestion and said were probably saving about 40% of my gross salary. They were shocked. The next day, I came home, and my wife greeted me with music to any husband's ears -- she said, 'You're right.' I had no idea of what she was speaking. I was almost afraid to ask about what I was right about. She said that when she heard my story, she thought it was quite an exaggeration to say 40%. She said she'd never added it up, but did so that morning. We had some money going here and some going there. She was shocked to find out that it added up to 42%. She said she would have believed 30%, but obviously not 40%. In all my years, I have never heard of anyone else following that approach. I've suggested it numerous times but have no emulators," though I do think he says, "my youngest daughter and her husband have been close to following it."

In conclusion for this week, thank you for listening all the way to the end. We talk a lot about Foolish investing. We always will here. But what powers Foolish investing? The habit of saving. Thank you, Dave Gek. Thank you, Jordan Hopper. And thanks to each of you for suffering a Fool gladly yet another week. Fool on!