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How to Be Diversified Without Overexposure

By Motley Fool Staff – Jun 2, 2020 at 7:54AM

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Discover the best way to protect against being overexposed to a single sector or company while still letting your winners win.

In this episode of Rule Breaker Investing, The Motley Fool co-founder David Gardner is joined by an array of guests to answer some investment and financial questions from the May mailbag and also share their experiences.

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 May 26, 2020.

David Gardner: Well, it's the last Wednesday in May, and that means it's time for our May 2020 mailbag, looking back over the month that was. Old, New, Borrowed and Blue kicked us off in May, and I think, in particular, of the celebration of the loss of celebration that we featured in that first week in the Blue section, of particular note.

And then, the second week was campfire stories and we gathered around and heard some of your stories and some of mine. And we'll be talking about that a little bit in the mailbag today. And then last week, your birthday present to me, What You've Learned From David Gardner Volume II, a delight it was to share that out. You made that podcast because you wrote in and let me know what you've learned and I mirrored that back out, as is the case with that annual tradition.

And now we're to our monthly tradition, of course, it is our May mailbag, only on Rule Breaker Investing.

Welcome back to Rule Breaker Investing. Thanks for joining with me this week. I like to start our mailbag each time with some hot takes from Twitter, and I'm just going to go right into it, because we have a lot to cover on this mailbag. I've got a parade of guest stars that are coming through as I usually like to do at the end of each month, but this one just starts with little old me reacting to some of my favorite tweets.

So, Cameron Howe @UWSinNYC. You said, "Whenever I hear Buck on a podcast ... " and you're referring to Buck Hartzell, who brought dividend investing to this podcast in mid-April. But Cameron you say, "Whenever I hear Buck on a podcast, I remember that exchange with my fellow Fool whom I'm still friends with, and it brings a huge smile to my face. Can't tag Buck, because he isn't on Twitter, but would you mind sharing this with him? He probably won't find it as funny as we still do, but he might."

Cameron goes on; this is all in a single tweet. "I was a Fool employee many years ago for a short time, Buck was in IT -- information technology -- back then. He was always so helpful, and after he fixed the computer issue I had one day, I said to my desk-mate, that guy is so money, and my fellow Fool immediately replied, "Yeah, that's why his name is Buck.""

Well, thank you, Cameron, I know Buck is going to enjoy hearing that one again, and best wishes to you in your new life post Fool, hope all is well.

Next one comes from one of the better Twitter handles, I think, on all of Twitter and that's from @JefeMcOwnage, Jeffrey Ashbrook. Jeffrey, you wrote, "Before I listen to the Rule Breakers podcast, I watch about 20 minutes of CNBC to send my stock think pallet into the norm. Rule Breakers cleanses it and solidifies the kind of alpha making rule breaking thinking that puts a smile on my face."

Well, @JefeMcOwnage, that tweet put a smile on my face. [laughs] Thank you.

And @Enkidu82. "The podcast is great, the results amazing, but the best part has to be the names of the samplers."

Well, thank you very much, Enkidu, and you know the person who typically names my sampler is my podcast producer Rick Engdahl, but, yes, we've done 24 separate Five-Stock Samplers over the last nearly five years. And earlier this year, we thought about Marie Kondo 5 Stocks That Spark Joy. They definitely have sparked joy since this January, but 5 Stocks With A Tailwind Blow. Mmm-mmm, good stocks. Or just 5 Stocks That Start With The Letter M. We have a lot of fun with our Five-Stock Samplers.

And part of what we'll be doing in June is, of course, reviewing a few of them in a Review-A-Palooza episode coming up next month. I should also mention, in advance of next month, we'll have another installment of the market cap game show awaiting us in June. Anyway, thanks Enkidu.

Two more, Matt Rantala, frequent correspondent, @Sisu_Runner. "Question for the mailbag of the Rule Breaker Investing podcast." Matt writes, "I'm running a virtual marathon ... " I'm trying to figure out what that is, Matt. I guess I'm also going to be running a virtual marathon [laughs] in June. More seriously, though, he says, " ... to raise money for a children's hospital." I believe that's in Minneapolis. "What song do you recommend I add to my playlist? Thanks, and Fool on!"

Matt, I had the pleasure of opening up a morning meeting of one of our local companies last week and I just thought, you know, what makes sense? There has to be a Fool song, right? So, I went with What A fool Believes by the Doobie Brothers. So, I'm going to go with that for your playlist; it worked for me.

Whoa! I see my producer Rick Engdahl raising his hand. Rick?

Rick Engdahl: I just have to throw out as another suggestion with an energetic song that you can exercise to and also one of the most Foolish songs I've ever heard, and that is what's become our de facto theme song around the office, A Company Of Fools by a band called Great Big Sea.

Gardner: It is. It's a great song. Also, I love the lyrics, just the phrase Company Of Fools, because I guess, that is what we are and I don't just mean Fool. Inc, although that too. I mean all of us, you, our listeners, you are our greater Fool community worldwide. Great song, Rick. Thank you, Rick. By the way, have you ever run a virtual marathon?

Engdahl: I have not run a marathon of any kind. [laughs]

Gardner: I would recommend, if you're going to run one, start virtual.

Engdahl: I think that's the way to go.

Gardner: I will say, my brother once ran on a treadmill, I think, the equivalent of a marathon, a day, for a few days in a row, based on losing a bet or something like that. Long-time Fool fans who follow Tom will know the details of that. But I have seen some remarkable run-in-place endurance in my time. Anyway, thank you for that, Matt.

And the last tweet I want to feature, and certainly not the least, and in fact, I'm not even going to be able to feature all of it, because Dhaval you did a wonderful job with almost a tweet storm. You had several replies to yourself and made some good points. But @dhaval_Kotecha, I'm going to say, K-O-T-E-C-H-A, it's pronounced that way, but if it's something different, my apologies, Dhaval. Yeah, you just mentioned that your wife began investing exactly a year back, a year back last week. You mentioned that she has fewer positions than you. She's, obviously, just started recently, but she is outperforming you and looks like you're both doing awfully well, a combined 28% return. That's wonderful. You mentioned though, some of the facts about her, and I loved it. She can tell the price or market cap of all of her holdings relatively within an acceptable range. She bought great quality companies, she kept adding to her winners. She has not sold a single stock. She doesn't watch CNBC, she does follow The Motley Fool, and she does enjoy picking your brains and making her own decisions, ultimately, based on her own research.

Well, what a wonderful shared effort to beat the market together. And studies show that one of the things that can most divide couples are questions about money or different views of money, that has resulted in many a break up, but I would assume that the opposite is just as good, that is, the more that you work on it together, the tighter it knits you. And it's a delight to see how well she's performing and how well your family is doing. So, congratulations to you both.

Alright. Well, let's get this mailbag started. Rule Breaker mailbag item No. 1, and I want to introduce one of my longest time friends at The Motley Fool and one of the founding members of the Rule Breakers service, Rick Munarriz.

Rick Munarriz: Thank you, David; pleasure to be here.

Gardner: Thank you. It's a delight to have you. And I'm describing you as a founding member. I mean, that is actually, kind of, how you came to Motley Fool. You were a member originally, but I really meant to say, analysts, because you've been picking stocks from year one. And I think Rule Breaker started; I know Rule Breakers started in October 2004, so that means, here we are +15 years later together.

Munarriz: Yes, it's a long time and thankfully a great long time. So, yes.

Gardner: Yeah, it has been a remarkable 15 years. And, Rick, you've picked some of the best stocks that Rule Breaker members have ever bought. I would love for you to give one or two sentences beyond just what I know that you do. I know that you work on Rule Breakers, but you do a lot at The Motley Fool.

Munarriz: Yeah, absolutely. I mean, obviously, Rule Breakers, it's where my passion is, but I'm part of the Supernova team, I was lead analyst for Phoenix 1 and then Phoenix 2, and now I'm part of the Starshot 2019 team on the newsletter. And on the site, if you ever land on, there's a good chance there's an article I wrote that may annoy, but I've written, I think I counted, it was almost 25,000 articles I've written over these last 25 years, so I do get around.

Gardner: That is incredible. Are you the Cal Ripken of Motley Fool editorial? I mean, do you ever take a day off, Rick?

Munarriz: I don't. But if you mention Cal Ripken, I should say the only time I saw Cal Ripken play live, I went to Baltimore, Camden Yards, went to see him play. He got ejected in the third inning. So, like, he bats once and then argues with the ump, and so, yes. But I would not mind any kind of longevity like what Cal pulled off, so.

Gardner: [laughs] Oh, that's great. Well, thank you, Rick. And I would just love for you to join in with me for these first two mailbag items. And I'm going to introduce this first one from Scott Hogeveen. And Scott writes, "Hey, David, I just wanted to thank you and The Motley Fool for all that you do. I'm a very new investor. I saw the stock market crash in March as an opportunity to turn some cash I saved into much more effective savings by taking advantage of the economic downturn. I am a 26-year-old Canadian investor with a longtime horizon for investing. I've already learned so much from The Motley Fool and from the Rule Breaker Investing podcast."

Scott goes on, "I own positions in a number of companies already, including some Rule Breaker recommendations, which happen to be my biggest winners." Well, we're really happy to hear about that, of course, I wonder what he's talking about. He writes, but he goes on to say, "This list includes, Tesla, Shopify, Sea Limited and Beyond Meat. This leads to my question. One of the core philosophies of Rule Breaker Investing is to let your winners run and to even add to your winners, which is an attitude that I am on board with. However, I was wondering how to balance that philosophy with the generally held opinion that you should have a diversified portfolio so as not to be overexposed to a single sector, or I might add, in this case stock as, for example ... " Scott concludes, " ... if I continue to add to my winners and let them ride, it won't be long until a significant percentage of my portfolio is technology, especially because Tesla is virtually a tech stock at this point," he asserts.

"I'm just looking for your opinion on the best way to protect against being overexposed to a single sector or company while still letting your winners win. Any help you can give is greatly appreciated. Thank you so much for the help you've already given. Fool on!"

Well, Fool on! to you, Scott. I should mention, Scott wasn't the only one with this question. Bryan Lamoreau, might be a French-Canadian name, but, Bryan, I'm not saying you're from Canada. Although I am delighted every time we get notes, and we do get quite a bit, from Canada. We speak generally the same language and while we don't have the exact same stock markets, there is a lot of overlap. But, Rick, this kind of question is a global question, it's an evergreen universal question. And I'd love for you to start tackling it and helping me think and help Scott and Bryan and their ilk figure out how to do this right.

Munarriz: Sure. Scott and Bryan, I think it's just instinctive to let your winners run. And I mean, looking over my portfolio, my top five largest holdings have all at least tripled. And it's not because, oh, I'm a good stock picker or even a mediocre stock picker, it's just that is what happens normally, like, your bad stocks will go down. And it's a lot easier to think, I'm going to buy the stocks that are going down instead of the ones that are going up, but that does not change the fact that over time your best picks will bubble up to the surface. So, I think, it's really not an issue of having to add to your winners, which is a smart policy, but also sometimes -- and I'll tell you a story here, a story which I like to repeat every so often, because I kick myself about this, it's my Netflix story, not in the Rule Breaker universe, but clearly, a very big part of a lot of Rule Breaker portfolios, it follows portfolios.

I was lucky enough to nail it as close to the bottom as you can get in October in 2002. A few months after it went public, it was a broken IPO. I bought 500 shares for a few thousand dollars. The stock split 2:1, it split 7:1. Along the way, even before that first stock split, I sold 80% of my position, like, basically months later after a little uptick. And then a few years later, I sold half of my remaining 20% of the stock. It went -- I wanted to put a down-payment on a vacation home. And then just recently, about a year ago, the 10% I had, I sold half of that. So, I have 5% of that original 100%, yet it is my largest portfolio holding by far.

And I look back and I think, alright so, I wrote an article about five years ago, it was Netflix, and I think it was like, my $800,000 mistake. Now, it's more like a $2.7 million mistake. And that's probably what will just be etched on my headstone when I die, but I think the fact that at least I hold 5% of it on. And I keep thinking, what if I would have added to that position? I mean, it's just ridiculous sometimes that you think, "Oh, it's just doing so well," I'm not worried about the diversification angle of this.

I think, especially since technology is a kind of sector, it's not like you're loaded up and you have 80% of your portfolio in airlines, and not that airlines are a bad investment. I'm just saying in general, I think tech is such a wide open investment that a stock like, let's say, a Roku or a Teladoc, two of my five largest holdings personally, and very good winners for the Rule Breakers portfolio, but with them specifically, I don't see them as technology companies, I see one as a video entertainment company, I see the other as a medical disruptor. So, I don't necessarily see all technology stocks as technology stocks.

Gardner: Boy! I sure agree with that, Rick. And let's just pull this apart a little bit further. Thank you for that wonderful story, that sad, but inspiring story. You always tell it with a smile on your face, because I think you've still done pretty well overall. And those are great companies that you have among your top-five holdings. But, yeah, we all can look back and see the things we could have done better. And they don't always have a $2.7 million price tag, but you know, again, it's a great story.

I do think that, with Rick, I'm going to agree, both, Bryan and Scott, that I don't spend much time thinking about the sectors that my money is allocated into, I really just think about a diverse mix of companies, and even companies that are operating within the technology sphere or the medical sphere are often doing completely different things, different areas of the economy, maybe one is actually just a generic drug seller and the other is a [laughs] medical device products company. And so, there are such a rich variety of companies.

I do think it's worth being in a variety of companies. And, Rick, you just mention it among your top holdings, those are three completely different companies you just mentioned.

Munarriz: Yes. I mean, Roku and Netflix are sort of similar, they're right in that same wheelhouse, but they're definitely different in their models and approach to how they're entertaining you at home. But, yes --

Gardner: I agree, and certainly Teladoc is different. But yeah, even just within Roku and Netflix. I mean, one is very much, obviously, a content provider and the other is an aggregator. But regardless, it's not about three companies, it's about having that mix of 15 to 20.

Rick, one more question I think I hear in these, and I'm actually going to bring in one more voice for Rule Breaker mailbag item No. 2. So, let's just broaden a little bit, but Brett Weinman, talking about selling winners, wrote us this in the past week.

He said, "Hi, David, I had a question recently I was hoping you can answer on the podcast. A few months ago, when Apple was continually hitting new record highs, I felt that the share price was rising too high too fast, so I cut my position in half. When it was trading around $260/share. Looking at it now it seems like I made a pretty big mistake, since Apple has continued to grow and doesn't show any sign of stopping." Now Brett goes on, "I'm 19 years old, so I'm going to use this as a learning opportunity to hopefully avoid similar mistakes later in my investing career. How can you get a sense of when a stock is a rock star that you should increase your position in and when it has reached its peak? And also, if you feel you've gotten out of position too soon, is it best to buy back in and take the loss or move on to another opportunity? Thanks in advance for the help."

So, earlier we began the conversation, Rick, talking about adding to winners. I feel like we haven't still fully answered that, but I wanted to make sure we added back in this idea of watching a stock go up and thinking, you know, I should sellout. That was, kind of, your mentality with Netflix, am I right?

Munarriz: Yeah, definitely, and I regretted it along the way. And sort of, addressing Brett's concern with Apple is, the more you own a stock, the better you know the company, the better you know the industry. So, you sort of can appreciate more the potential in these stocks, which is why it always hurts so much when you sell it and you see it go higher, because deep down inside, you knew that is exactly what was going to happen. And sometimes you may actually get it right and the stock does go down, but, no, I think more often than not, the more integrated you are with a company in your portfolio, you're watching it on a regular basis, the more likely you are to know that its potential is probably larger than you even imagine when you first bought in.

Just about every stock that I own that's done well, has done well because the story gets better. And the more interested you become in that story; the potential grows higher.

Gardner: And that's really well put. And I'm seeing Apple, as we're recording, it's at about $318. So, he sold half his position at $260. It is worth pointing out that what you do with that money also matters. So, if you sell out of something, it isn't just about regretting if that continues to just go up, maybe you put it into something that did as well or better. Now, there is always the capital gains tax you have to pay if you've had a profitable position. So, your salt, that you're watering down your positions some there. You're also having to act multiple times; the sell and then the rebuy, Rick, sometimes people have commissions. So, there is friction to making these decisions. It's more work, but it's not always fruitless.

I guess I want to conclude then, Rick, with just a little thinking on, how large would you allow a position to grow in a portfolio before you decide, you know what, I am going to sell some of that?

Munarriz: Yeah, I mean, I had that issue the last 5% of my original Netflix stake that I sold, was just because the stock is really, it was more than 20% of my portfolio. And I felt that was a little too much. But in retrospect, you know, I would have rather owned 100% of Netflix from 2002 then make these pruning away decisions. I don't know the right answer, and I think it's each to each, everybody is going to have a different opinion on how comfortable they are putting all their eggs in one basket.

But if you have all your eggs in a really good basket, I don't have a problem with that being a larger part of the portfolio. Asset allocation will say you want to be well-diversified, but I'd rather be diversified in maybe 5, 6 really good stocks that I know well, in industries that I follow, than just saying, I'm going to sell this stock that I know is going to do really well only because it's done really well. It's sort of, you know, it's a self-fulfilling prophecy or the opposite of that.

Gardner: Well, thank you very much, Rick. And thank you for those questions, Brett and Scott and Bryan. A few quick thoughts from me in conclusion. One is, I really like equally allocating at the start of the horse race. So, Rick, I've always thought about, you know, my portfolio as, let's say, the Kentucky Derby, when there's +20 horses for that first Triple Crown race and they're all chomping at the bit, waiting for the bell to sound. And I like putting an equal amount of my money on all of them, if they are stocks.

But the beauty of investing is, versus horse track betting, the beauty of investing is, you can keep adding throughout the race. And so, it becomes obvious to me which ones I want to have my money on and add to. And I think that's a much better model for most people and their mental pictures of how to manage a portfolio than the idea of rebalancing, pruning or guessing about what to add to or subtract from. So, I do think the horserace and the diversification at the start works.

But once the race starts, Rick, we've seen winners win, and that's one of our big themes and I heard a lot from [laughs] our listeners last week, what have you learned from this podcast? Winners win. So, the last two factors, we have to think a little bit about, I guess, are just the risk tolerance of each of us and then the length of time that we have to invest. And we heard from two correspondents there who are 26 years old and 19 years old, respectively. So, what does that make you think, Rick?

Munarriz: Yeah, it makes me think that, first of all, I love the fact that our younger listeners are investing so early. I wish I was as smart as some of these people at 19 and 26, but more importantly, I mean, you're absolutely right, it's the Triple Crown of investing. You want to win all three races and you always want to pick the lead horse. I think that, yeah, it's the way to invest.

Gardner: Yeah. And you can take more risk probably at the age of 19 or 26 than if you were 66 or 89. And we all hope to get to 89 one day. And when we do, presumably, some of us listening right now are already there. But I can imagine them nodding their heads saying, yeah, you have a different mentality when you get further on in life. You can't necessarily afford to lose as much and you wouldn't want to have a huge position dominating your portfolio. So, in the end, there's never going to be, as Rick just said, there's no cookie-cutter answer that works for everybody, it's more about assessing the factors that we just discussed and making your best call.

But having that sense, Rick, that we should keep watering the flowers, keep pulling the weeds for long periods of time, starting young -- like these gentlemen have in their portfolios, that's Foolish.

Munarriz: Yeah, definitely. Always carry a big watering can full of money.

Gardner: [laughs] Well, thank you again, Rick, for joining us on this week's mailbag, and great to be working with you. Looking forward to what the summer holds for all of us as investors and beyond.

Munarriz: Thank you.

Gardner: Alright. And, you know, thinking back on those first two items, it was, kind of, about winners and how to add to them and when to sell them or not. And so, we're transitioning then to Rule Breaker mailbag item No. 3. And I'm thinking again -- well, I'm getting some help thinking, with my correspondent Erik Eason about the story I told earlier this month about my time at the Columbia School of Journalism and what I was saying about the power of news that could be positive and would be there to instruct, and how maybe there would be some new form of journalism one day that would be looking at what works in this world as opposed to poking at things that aren't, and investigating them; again, which I admire.

But anyway, the message that I gave, [laughs] which fell flat a couple decades ago, Erik Eason, you've taken the time to comment, to write me about that, Rule Breaker mailbag item No. 3. "Hi, David, the topic of your lecture to the 1999 graduates, it was actually the students of the Columbia School of Journalism, was spot on. I don't believe for a moment that you put your foot in your mouth." Well, that's very kind of you to say that, Erik. It didn't feel that way at the time, "But rather I believe you spoke a truth when you told the students that while investigative journalism is what they all aspire to and it has clear value, they should also aspire to writing about what is good in the world. The need for journalists to hear this has only grown in the subsequent two decades, as most of journalism today deliberately avoids or even outright denies it."

Erik says, "I can point to three prominent individuals who agree with you, all of whom openly practice that truth." And Erik cities, Oprah Winfrey, Ellen DeGeneres, and C. S. Lewis. And Erik says, "While none of them are journalists all are, or were, active in public media. C. S. Lewis is the one I wish to highlight for you." Erik writes, "His Christian writings usually elicited rancor and occasionally outright hostility from his more orthodox Christian audience. A journalist once asked him during an interview how he felt about that. I don't recall his exact response ... " Erik says, " ... but it was something on the order of the angrier my audience, [laughs] the closer to the mark was my arrow. Yours was a well-aimed arrow at modern American journalism. Well done! Thank you for speaking the truth. Yours truly, Erik Eason."

Well, thank you very much for that, Erik, and I'm not really going to editorialize further. And I really do want to make sure everyone's hearing me that I appreciate investigative journalism, it remains a really important calling in this world that can be bedeviled by fake news, as a lot of us have become aware of in recent years. And yet, I do appreciate you supporting the notion that of at least equal value is, a form of journalism that is there to teach, that's looking for what works and that upholds successful examples as a way to instruct not just you and me, but how about younger people, people of the next generation about the things that are good in this world.

And, yeah, I think I was talking about a parallel between that and the movement of positivity within modern psychology. Earlier 20th century, psychology was largely concerned with phobias, depression, all the things going wrong in our heads. And somewhere in the, I'm going to say, 1990s, Martin Seligman of University of Pennsylvania -- I did talk about this earlier this month -- really started a new focus on what's working in our brains and who are some of the successful people that you and I would want to emulate to become healthier with our psychology. And I really do appreciate that, I think that was an important movement within psychology, even though I'm an observer from afar, by no means am I somebody who's deeply steeped in this. But I do see parallels between that and what I'd like to see and what I was saying 20 years ago [laughs] at Columbia University School for Journalism.

So, thank you for that note, Erik. And, yeah, I'm happy to be in any sentence that includes Oprah Winfrey, Ellen DeGeneres and C. S. Lewis. I really do like each of them for the positive things that they have done in the world and the way that they spoke about the world and inspire us. So, thank you.

Alright. Well, now it's on to Rule Breaker mailbag item No. 4. And it's been a couple of mailbags since we last talked about Investor Island. The game has proceeded with some more development. And we had a big weekend though last weekend, a big release for some new features for our favorite mobile app, our favorite mobile game. And back is my friend Max Keeler, our Project Lead. Max, welcome back to Rule Breaker Investing.

Max Keeler: Hello, David; nice to be back on the podcast.

Gardner: Thank you, and I think you were last on it a few months ago talking about some of our new features at that point. Now, a lot of new listeners are coming into this show and a lot of The Motley Fool, [laughs] resources over the course of the last couple of months, so I'm not going to assume everybody knows Investor Island. Max, in thirty seconds or so, can you give the elevator pitch for what our game is?

Keeler: Yeah. So, Investor Island is a unique game that blends board game strategy with real-time stock data with weird bizarre tiki-themed statues. [laughs]

Gardner: Well, you're on an island, right. You're on an island and the stock market is trading, but you're trying to kind of take over the island, maybe like the game of Risk, except rather than rolling dice, we're using stock market data to power the game. Is that fair?

Keeler: That is a fair description. There's really nothing else like it, you'll have to experience it first-hand, I think, to really understand what's going on. But, yeah, generally it's a fun game, you play against other people, you can play solo, you can play against the bot. And just, sort of, maneuver your way through the various maps and try to outflank and outwit your opponents, and it's a lot of fun.

Gardner: If people are interested, you get ranked. So, like, some other online games, you can even see where you fall within the community. I think we do a pretty good job with onboarding in the tutorial. So, it seems to us, Max, since we see the data on the receivership side, we can kind of see the people it looks like are getting it, right, they're not confused by our mashup.

And I'm happy to say, and congratulations to you and the team, 4.7 out of 5 stars with hundreds of reviews on the app store, makes me feel like people are getting it.

Keeler: People seem to like this game. So, yeah, we've really been hard at work lately. We just released a whole bunch of new features just this past Saturday, though, it's been about three months or so in the makings. We're really excited about this. And we think it's, kind of, the last major piece of the game that we've, kind of, envisioned. And so, we feel like the whole game is out there now and people can really start enjoying it.

Gardner: That's awesome. And, of course, the timing of last Saturday's release fits very nicely with our monthly mailbag. That's exactly why I'm having you on, Max. So, let's talk about it for a couple of minutes. What is the big new feature that the team just brought to the island over the weekend?

Keeler: The big one is what we're calling "perks," and perks are basically a way to add powers and abilities to the stocks in your game. So, for those of you who are unfamiliar with the game, basically, in the game you have these major game pieces that are based upon real life stocks. And so, how that stock performs in real life determines how much power that peace has in the game. We call them "temples." And we've just added perks, which allows you, as you level-up your temples, which you can do in the game, you can actually select extra powers. So, some of the powers, for those that are familiar with the game, are things such as, your temples have more health or they give more damage or you can bring an extra spell into the game.

And some of them get a little bit more interesting where they power-up the pieces on the board that you, kind of, use to win the game. We call them the statues. One of those is called "parting shot." So, when your statue is destroyed, it gets one last dying throw which can make the difference between holding the line or advancing. So, lots of little ways to, kind of, power-up your pieces in the game.

And for a lot of modes of the game, you have two or three temples available, so you can, kind of, mix and match your perks. So, you can, kind of, come up with new strategies.

Gardner: That's right. And from a game standpoint, those temples are kind of the resource generators, they're what give you the resources to expand across the map. And you're trying to take over the map in each given match in Investor Island. So, you're right, Max, what's really cool I think is that, we've now given players who are kind of collecting stocks over the course of their time playing Investor Island, from one match the next, your stocks are leveling up and improving. And now you can, kind of, tweak them out and add all kinds of unique strategies that just didn't exist a week ago.

Keeler: We have 12 new perks that we've added to the game. And so, there's a lot to explore, lots of combinations, and we have a whole bunch more coming. So, it's really going to be a neat addition to the game.

So, we're excited. Come play, if you haven't played in a while, jump in, see what these perks are all about. And if you haven't played before, give it a try. Let me know what you think, you can just drop a note to [email protected]. And we have a message board, if you're interested in posting feedback or getting some strategy and tips.

Gardner: Well, thank you, Max. And it's fun to think back that it was probably about a year ago that we first started talking about Investor Island on this podcast, and to think about all of the progress the game has made and all the people who are now finding it and playing it, we're still in early days, but it's been exciting. And as you mentioned, this is kind of the final big development piece, the board game is now fully built, all of the features are in place as of this weekend. So, I want to commend you and our team for all the hard work that they've put in on behalf of all of us islanders.

Keeler: Thank you, David, I appreciate it.

Gardner: Alright, Rule Breaker mailbag item No. 5, when I get to introduce my friend Jill Ralph. Jill, how are you doing?

Jill Ralph: Hi, David, I'm doing great, and I'm so excited to be here.

Gardner: Thank you, Jill. Now, am I right that you've been at The Motley Fool, is it 2006?

Ralph: It is. I celebrated my 14th Fooliversary during this pandemic. And so, I did not get my normal balloons, but, yeah, 14 amazing years. What a weird 14th year!

Gardner: Yes, it's one that we'll never forget, but I'm just so happy to have you on this podcast. And, Jill, your responsibilities these days are far afield for The Motley Fool, is that an accurate statement?

Ralph: Indeed, it is. I am now overseeing our Global Membership business. We have a presence in six different countries, and we also have a brand-new affiliates business that we're starting in the U.K. So, it's seven little mini-businesses in our global business.

Gardner: Well, that's really wonderful. I'm so glad you're working on that. And, of course, Jill, I had you in because I got a good question. I think it's about a country in which we're not presently operating, but a big and very relevant one, so let's just go right into it.

This one is from my friend Anand Khatri. Anand says, "Hi, David, I hope you're doing well in this pandemic condition. I'm enjoying Motley Fool TV," our, "during the quarantine time, it's a great effort, good to put faces to the names of The Motley Fool analysts who write and do research on the companies." Anand goes on, "I wanted to share a small story with you, and one question at the end. My dad is 75 years old; he lives in India. He is an investor. He started saving small and investing when he was 30 years old." So, a total of, I'm going to go with 45 years of his investing journey. Wow! "He loves investing in individual stocks, mutual funds. I talked to my dad last year about a possible Motley Fool service in India after listening to the February 2019 mailbag. Well, fast forward ... " Anand writes, " ... to last week, I was talking to my dad again. He reminded me what happened to any investment service in India that we may or may not have been talking about last year?" Anand concludes, "Initially I was clueless, because my dad didn't mention the name, but I thought for a few seconds, it struck me, he's talking about The Motley Fool India's service. My immediate answer to him was, I don't know, I need to check."

And he went to our website, Jill, and he didn't see any tab for Motley Fool India. So, the question at the end is simply, "Is there a plan for any Motley Fool India services?" So, that's why I wanted to invite you in.

Ralph: Great. Well, first of all, I always love hearing stories like Anand's and his father's about Foolishness truly around the world, and decades of Foolishness no less. So, thank you, Anand, for writing in and congratulations to you and your dad for what sounds like a great investing journey so far.

So, you're not mistaken, a few years ago we were exploring Motley Fool India and whether to incorporate there. And as with any possible new country entrance for us at The Motley Fool, we really look at the overall opportunity, both, for us as a business as well as for our members there. And the, kind of, the access to the stock markets there and the access to the world stock markets. We look at the complexity, whether that's language or operating climate or cultural norms. And then we balance those with just overall opportunity cost.

And so, I believe, ultimately, we said "no" about a year, year-and-a-half ago to India. We just said, no, for now, the timing wasn't right. We didn't necessarily have the right people on the ground or the right resources overall to give it a really truly Foolish authentic go there, but that's not to say we won't go back, it's just not on the radar right now.

Gardner: And thank you for that, Jill. And even though I'm not aware of everything that we're doing all the time, I was generally aware of that. And I know it's not exactly easy in some countries to set up an internet business from scratch, it's especially sometimes not easy when you have to deal with financial regulations that have lots of concerns or additional baggage around giving money advice over the internet in different countries. I don't know about India, but I know that has bedeviled us occasionally as we think about expanding to some parts of the world.

Ralph: Absolutely. And the decision about India, kind of, predates me and global. However, what you just said, David, holds true in every country where we currently operate as well as every country we may explore, the local regulations matter. And ultimately, we won't be doing our members or our business, any service if we aren't able to actually operate compliantly and efficiently in order to, kind of, scale our business and advice all around the world.

Gardner: Well, I do take some heart thinking, Jill, that even if we haven't opened up Motley Fool India yet, we do have a lot of Indian members. And one of the great things about India is, there are a lot of people who speak English and that makes it easier for us to give something like the Motley Fool Stock Advisor to other countries in the world. So, a lot of very literate people who do love investing in that very large country.

Ralph: Absolutely. And like you said, it's a high English-speaking nation. It also has a huge stock market locally. However, it's very hard for us to invest in Indian companies. The reverse is not true, it's easier for people in India to invest outside. And so, that was also a factor when we looked at whether or not to enter in terms of whether we could scale our advice from around the world into India as well as the other way around. So, it's always a complex decision-making matrix when we look at these countries. And India is just so interesting, I think we will look again.

Gardner: Well, certainly. And, Jill, thank you for your leadership. Anand concludes with, "I know you have at least one member who will be excited and waiting [laughs] for any services we offer. There will be many other potential members waiting for it." Obviously, a big, very relevant country worldwide. I mean, let's hope, with our respective jester caps on, Jill, that we can reach as many people as possible over your next 14 years, and I'm really delighted that you're helping us think through how to expand Foolishness worldwide.

Ralph: Absolutely, David, it's an honor.

Gardner: Alright. Well, Rule Breaker mailbag item No. 6 is one of those inspiring stories that I love to share on my mailbags. And I want to thank Daniel [Trinh Dajay] -- I hope I have your surname right, Daniel -- but I love this note, and thank you very much.

"Hi, David, how are you? I've been a Fool for quite a while, but officially a member since the 6th of May, 2018. Before I became a member, I read a lot of articles from your contributors, listened to a lot of Motley Fool podcasts for a while. All the principles of investing you teach and the articles you share are the best knowledge one can look for before they start their investing journey or even after they've started it." Well, thank you for that, Daniel.

"A little after I became a member of Stock Advisor and Rule Breakers, I decided to make a simple experiment. I chose 15 stocks, one of your principles for success, a portfolio of at least 15 stocks." And you're right, Daniel, that's a number that I put out there, it's kind of the minimum weight, a minimum number of stocks to start a portfolio, 15. So, thank you for that. "And put my own money in that portfolio. And it was May 15th, 2018; I'll never forget that date. I did fairly well and then came quarter four 2018, [laughs] on September 30th ... " you say, " ... I was up about 15%, by December 24th, my portfolio was down instead by 15%." I think a lot of us investing through the fourth quarter of 2018 can relate and remember how badly the market got whacked those three months.

But Daniel goes on, "Strangely, I didn't feel worried at all. I had embodied the principles of winning in my time horizon for those great companies. I had chosen, it wasn't six months, but 20 years. I remember listening to your Rule Breaker Investing podcast that December 2018, you shared your own pain, [laughs] your portfolio was also down hard." I think it was actually down a little worse. "But I could "see" you never stopped smiling." See in quotes, because, of course, this is audio.

"Well, I kept on buying ... " Daniel writes, " ... all the way down, methodically, whenever I had money, that I would not need for the next three to five years available. And it paid off, 2019 came, my portfolio started to soar. So, I decided to put up a model portfolio every single year on that same day, May 15th. So, then again, in 2019, and this time, among all your recommendations, I started doing my own research and built up my investment thesis for each of those companies, even including a few outside Stock Advisor and Rule Breakers, but still the same approach, finding great businesses, investing for the only term that matters, the long-term."

"Happy days ... " Daniel continues, " ... I flew from Dubai to Washington DC to be present at the Capitol Discovery Summit." That was an event we had here at Fool HQ. "One of the best events I've ever been to. It was a pleasure to hear your brother Tom and his ideas, have a quick chat with Emily Flippen, Jason Moser, Ron Gross and Dan Boyd, putting names to those voices I've been hearing every day of the week for almost two years. The cherry on the cake was I stayed over an additional day just to visit Fool HQ and my host Chris Hill. What an honor. Please thank Chris again for that. I couldn't shake your hand, David, and thank you personally for changing my life together with my family." I was away that weekend, unfortunately. "But I did leave you a small box of dates from the UAE." And thank you, Daniel.

"Then in January 2020, I heard your podcast with Chris on a virtual market crash. What a great way to check if you have the right frame of mind to go through such an event. It felt real, and I felt so calm, never losing focus or feeling any despair. Thank you for that. And as February 20th came, I could not be more prepared. Again, I did not sell a single share, but bought more, despite all the noise in the background and people telling me I was crazy, that I should sell it all, go to cash and buy again later on. I just stuck to the plan and stayed the course."

"Two months later, my portfolio is already higher than it was before this crash happened. I'm writing this now as I'm about to set up my third model portfolio." That's right, May 15th, so Daniel dropped this note about 10 days ago. "And the market hadn't yet closed that night. I live in Dubai ... " he mentions, it's 9:40 PM as he was doing it, but he was looking at the numbers from his first two portfolios.

So, the portfolio one from May 15th, 2018, up 106%. Wow! The S&P 500 up 5% by comparison. And portfolio two from last May, up 45%, the S&P 500 up one-third of one percentage point. Those are, obviously, truly remarkable numbers, Daniel. I think we would all be delighted. I think I'd be delighted to have those numbers myself. Those are otherworldly. So, you did a great job picking the 15 stocks that you selected.

And as I've always said -- we'll return to Daniel's note at conclusion in just a minute -- but, I've always said that anybody who's buying along with us in Stock Advisor and Rule Breakers, if you're like most, you're not buying every single stock that we say at every point, right? You're making choices. And so, whenever anybody comes up and shakes my hand, and I sure wish I could shake hands with all of you at FoolFest which is happening next week. We had over 1,000 people signed up to come to Alexandria, Virginia and Washington DC to celebrate with us as we do every year. And, of course, we had to make it virtual. Although, the good news about that, as I'm hearing from our organizers is, that we have a lot more people than we'll ever have attended a FoolFest [laughs] next week virtually, because, of course, it is virtual not in physical environs. So, there are benefits to that.

Anyway, when I do shake hands with people I always say, well, you are the one who pressed the "buy" button. It wasn't I who did that for you, I may have given you, my brother, Tom, may have given you, Motley Fool analysts, commentators, fellow investors may have given you ideas, but it was your choice to filter this one, not that one, and to press the "buy" button on that day, not this day. And so, anybody who's had successful results from The Motley Fool it was because they did it, they listened, they chose what to act on and they actually acted in a world where often it's easy to be paralyzed and feel paralyzed and not to act at all. So, Daniel, the numbers that you're presenting there are remarkable. I couldn't be happier for you.

He says in conclusion, "This is all in a world where people say nobody can beat the market, it's just crazy good for me to have such results in such a small period of time." He says, but of course, his focus still remains in the next 5-, 10- and 20-year periods. "Thanks, David, and everybody. I really hope we do get to meet one day, so I can personally thank you for all. PS: Please excuse my mistakes as English is not my first language."

Well, that was a very well-written note and most appreciated. And it was a delight to share that as Rule Breaker mailbag item No. 6, this May 2020. Daniel, I can see May is a special month for you every year, so thank you for sharing that with us.

You know, coming up in the next couple of points are some questions about how to use the Motley Fool services. And certainly there are a lot of members who listen to this podcast, and part of what I try to do every week, especially with our mailbags, is speak to my members and the people who are using Stock Advisor and Rule Breakers and the things I'm working on and figure out what is some of the best ways to use them.

Well, Daniel, I think you've figured out some wonderful ways to use our services and congratulations.

Alright, Rule Breaker mailbag item No. 7, and, in fact, we're going to throw No. 8 in, in a bit as well. And I have my friend Ally Wines. Ally, how are you doing?

Ally Wines: I'm doing great. It's so great to be on this podcast that you guys are still running strong. I love this new virtual setup you have going on, so I'm doing great.

Gardner: Well, thank you. You look great, because I can see you through Zoom, even though we're muted on Zoom and using Zencastr, that is our platform that has made our virtual podcasting possible all these last couple of months or so. But, Ally, thank you very much for making the time.

Everybody, it's a little disruptive. I know that there can be a little child sometimes in somebody's background or there are all kinds of distractions that we have, but Rick and I have somehow managed to surmount those things and just soldier through, and it's been a delight to continue bringing Rule Breaker Investing every single week. And you know, I'm seeing both with these items, Ally, both of them are from members, asking questions about our services. So, I thought why wouldn't I have Ally on, who's done a great job speaking to us before, since you are helping run a portion of our business that's aimed at people who are joining The Fool and people who are using Stock Advisor and Rule Breakers?

Wines: Exactly. So, I mean, I've been at The Fool for about 13 years, helping members navigate our services. I've been through new services being born, but a couple of them have been mainstays and those are some of our newer services, Stock Advisor and Rule Breakers. I mean, more aimed at newer to The Fool subscribers. So, some of the listeners who might be writing and have never subscribed to our services before, typically will start with these, with Rule Breakers or Stock Advisor.

And, yeah, I'm always excited to talk about them. Everyone, of course, has a unique backdrop with which they come to our services with. So, we do the best we can, though, to help people get amazing returns.

And I'm a member too, you know, I've gotten great returns from our services over the years and that's been fantastic.

Gardner: Well, that is awesome, and thank you very much, Ally. So, let's go right to Sam Becker's question. Sam writes in, "David, I'm an admirer of what you and Tom and the team do, the information you provide. One issue that you haven't addressed ... " says Sam, " ... to my knowledge ... " and he says, he thinks he's listened to all of the podcasts. So, thank you very much, Sam, for listening to all of our Rule Breaker Investing podcasts. " ... how much one should spend on investment advice?"

So, Ally, Sam describes himself as intrigued by our new microcap offering, that my brother Tom is behind. The cost for that service, it's a higher-end service, certainly. He's mentioning, it is $4,000 for a year, but Sam says, he has maybe $10,000 to invest. Seems too large a portion. He closes, "You talk about the cost of brokerage fees, which can include research, but not this." And Sam, by the way, is a member of Stock Advisor and Rule Breakers and Market Pass. There are many offerings in the universe he'd like to own, but he's just trying to figure out what is the appropriate amount one would spend on investment research.

And, Ally, am I right in thinking that you and I both think that spending 40% of your portfolio on a service would be overwrought.

Wines: Agree. And, yes, we are in the business of selling services, but I would never recommend that someone spend that much of their portfolio. In good conscience we could never do that. I do have a couple of guidelines that we usually give to people. Typically, what we say is, if you're paying for financial guidance or advice, you want to limit that to no more than 2% of your portfolio size. So, for someone with the amount Mr. Becker has, definitely I would say for $10,000, about $200 would be more in the right realm.

And maybe, David, you want to talk a little bit about that. This was all a great learning for me about how to think about what portion of your portfolio you can dedicate to that, but we care about this a lot at The Fool.

Gardner: We certainly do. And, yes, Sam is noting that we've talked in the past about commissions and how you'd want to keep your transaction costs below 1%. And these days, the good news is, [laughs] that commissions have largely gone free or gotten extremely cheap, so that's no longer much of a concern.

But, yeah, I think, Ally, that 2% in terms of your investment research cost is a good benchmark. Now, I can easily see going above that, only with this argument, I'm certainly not pushing Sam toward the microcap offering. But you could imagine, a lot of people are willing to pay tens of thousands of dollars of tuition money for a college education or a degree. And if you think about the value of learning investing, and an investment education, I could easily see people paying more than $200 for something like that.

But taking it all-in-all, we're all adults and we're playing the long-term game. And I think that annual goal of 2% or less is really good. So, I mean, yeah, $200 is enough for a Stock Advisor subscription, you could throw in Rule Breakers, as it sounds like Sam has, if you're a real fan and learning investing. And again, there are lots of people who don't expect any return and pay tons of money [laughs] in tuition in the world. So, I think it's something we all have to decide.

Wines: Yeah, I agree. And I would say knowing that he owns a few of our services already, make it your goal to turn that $10,000 into $100,000 and more, and at that point, I would feel a little bit better. But just in good conscience, you know, we create services where you're going to find great stocks, like, Sam is going to have a great experience at his level, we'll make sure of it. [laughs]

Gardner: Yeah. And thank you very much for that, Ally. And, you know, Ally and her team, and really our company, is driven by a golden rule thinking, where we want to treat you in the way we'd want to be treated ourselves. So, Sam, in conclusion -- then we'll go to our mailbag item No. 8. In conclusion, I just want you to know that our goal is for you and for every member to get you into the right service. And I will mention we have an incredible member services team that continues to answer the phones [laughs] every single day, COVID or no COVID.

And so, there's a real opportunity for, not just Sam, but any member, to give us a call and find out what our offerings are and are you at the appropriate level for where your portfolio is, where you are on your investment journey, thinking, Ally, about that 2% goal that you put out as a benchmark. So, thank you for that.

Okay Rule Breaker mailbag item No. 8, this one's from Brian Darr. He writes a longer note just about how to use our services, Ally. And just truncate it and just get to the meat of it, he basically says, could you tell me a bit more about how Best Buys Now interact with those single stock picks?

So, my brother Tom and I in Stock Advisor, every single month, pick a new stock, occasionally we'll rerecommend an old one, but for the most part it's a New Pick. And there's probably a lot of focus on that, if you're a member, right, Ally, because people are like, what's Tom's New Pick?

Wines: Exactly. So, for my mind, the New Pick is where the excitement is, that's the spice. That's what I pay a little bit more attention to, that's where I'm less likely to know the stock. So, I got to expand, kind of, my understanding of what you and Tom are thinking about and what companies have caught your eye.

So, for Brian's question, and I love his approach, his methodical approach to investing, Brian, if you're out there listening. I think there could be something to following what David and Tom are doing, where every single month they find a new company to invest in. And that's the goal of the New Picks. Now, for Best Buys Now, these are more likely to be companies that you may already own, you may be a little bit more familiar with them. So, for me, when I'm investing along with Stock Advisor or Rule Breakers, and I know a lot of members do this too, that's where I might want to put more money into a stock I already own, because it's still a great buy, we still love the business case around that stocks.

So, it's almost like, to me, it's a balance of bringing new ideas in, and you got to have that. That's where I got Shopify, for instance. Wonderful stocks like that. But then on the flipside, Best Buys Now is, because I'm always trying to add to my winners, and so it's kind of a balance there.

Gardner: That's really well put, Ally, and there's a little secret, and I'm going to give it out to all of our listeners right now. I was surprised when I initially heard it. And that is that, if you look at the clicks and who's opening mails and what really drives the services, as it turns out, unless things have changed very recently, Ally, the Best Buys Now are typically a more popular click each month then the New Pick for our services. And initially I was thinking, that's crazy, wouldn't people like me be part of the cult of the new and want to know the new thing? But as it turns out, a lot of people are just allocating, as Brian is, he talks about $1,800 to invest. Yeah, you're seeing the note, Ally, where he has this unemotional, methodical, consistent treadmill he wants to go on with his money.

And so, as it turns out Brian, if you were to put at least half of that money toward existing Best Buys Now, that's probably about and keeping with how others approach the service. So, there's not going to be a one-size-fits-all cookie-cutter answer to this, because some people, as Ally just mentioned, hadn't yet bought Shopify. So, if they see it on the Best Buys Now, they're like, well, maybe now I'll buy it. Somebody else might have bought it each time it was on the Best Buys Now and be slightly over-allocated to it, potentially.

So, again, the services are going to be how you choose to use them. But, Ally, again here we're going golden rule and we're just trying to do unto others as we would have them do unto us. Give them the advice and help train them in terms of thinking how to use it.

Wines: Exactly. Like, I just see it designed as we as Fools invest. And we offer a couple of different paths. Again, you could just buy the new picks every single time.

I know Brian asked a little bit also about the historical track record of Best Buys Now versus New Picks. I think we reassess that every year and it's pretty close, the New Picks maybe beating the Best Buys Now slightly, if I recall, however, there are so many different ways to slice-and-dice this, in that we do 12 Best Buys Now every single month. So, for me, yeah, I would say, choose your path, Brian, and stick to it. Maybe I'd slightly suggest a mix of New Picks and Best Buys Now.

Gardner: And I think that's great. And, Brian, you're clearly somebody who's asking the right questions. And so, we're pretty sure, however you're going to end up answering them, I bet, Ally and I would give you a checkmark, there's not a one-size-fits-all answer though. Thank you for that.

Yeah, Ally, you mentioned 12 new ideas a month for Stock Advisor, that's five Best Buys Now from me, five from Tom, one New Pick from me, one pick from Tom. That's 12 new ideas. Those are all backed by our transparent scoring and our emphasis on performance. And you all can see; any member could see all of our best and all of our worst moves. So, it's very important to us to outperform the markets. And I'm happy to say, both, Best Buys Now and our New Picks have done that pretty remarkably so over long periods of time.

Well, Ally, I want to thank you again for taking some time out of your Tuesday afternoon to answer some member questions.

Wines: Thank you, David; great to be on. Stay safe, stay healthy in these crazy times. And let's keep investing, I sure am. [laughs]

Gardner: Thank you. Alright. Well, did I save the best for last. Here it comes, Rule Breaker mailbag item No. 9, and Robert Brokamp, a delight to have you join me.

Robert Brokamp: It's such a pleasure, David.

Gardner: Thank you very much, our Co-Host at Motley Fool Answers, our longtime Rule Your Retirement advisor, Robert, who actually has degrees in finance, or I should say Financial Planning among other things.

Robert, how do you introduce yourself in a sentence or two?

Brokamp: Yes. So, I've been at The Fool for more than 20 years. Before I was at The Fool, I was a Financial Adviser with Prudential Securities and before that I was an Elementary School Teacher. And I do have the Certified Financial Planner designation as well as a graduate certificate in Financial Therapy. So, that's how I introduce myself.

Gardner: Well, that is totally awesome. And while, Robert, we do value those things about you, I'm just having you on to have some fun, because you get called out in this final story I'm sharing, and I wanted you to be able to hear it.

Brokamp: That's outstanding, thank you.

Gardner: Alright, great. Well, let's settle in here, because this is a lovely note from Joseph Crivelli, who starts, "We're not complete strangers, you and I, David, we've exchanged a couple of messages over the last nine years since I've joined Motley Fool services. So, a birthday greeting is certainly in order, and especially when you ask for one." So, this could have been part of last week's show, but it arrived a little late, but I love the story, so we're sharing it with this mailbag.

Joseph goes on, "I'm delighted with my Foolish life, and in brief, that's my birthday gift, it's the knowledge that there's one more person out there whom your company has helped enjoy learning a new skill set, a financial heuristic for thriving in our wonderful, if complex, world. In a real sense, it's all a big lifehack, isn't it? I mean, how many hard and complicated issues would I be facing now if I hadn't begun investing with The Motley Fool? It boggles the mind to imagine how difficult and tiresome a daily grind could be and is for so many folks, unfortunately, without a bright financial future to look forward to when my wife and I retire."

"The Foolish mindset is a delightfully optimistic one, and that silly looking hat, I'm gladly willing to wear." Now, Robert, is it fair for me to say that you have also donned the jester cap many a time in your +20 years at The Fool?

Brokamp: I never go to bed without one. [laughs]

Gardner: [laughs] And I know, a lot of people do know you through certainly Motley Fool Answers and other services, but for anybody who doesn't know Robert, he's been featured before in our local paper, which has to be The Washington Post, so it's a paper of some national prominence, for his Halloween dress-ups from one year to the next, and what they're doing at crazy companies in town like The Motley Fool. And so, Robert, I actually can imagine you going to sleep with your jester cap. [laughs]

Alright. Well, let's continue on here. Joseph said, "I wouldn't have called myself a pessimist at any time in my life, but I do recall clearly, 15 years ago, a wiser man that I once said, anybody could become rich and when you really get down to it, you'll find it doesn't even take that long. I had shrugged it off, I had known up to then only to have the money I earn myself and how much effort it takes to earn it, that effort takes energy and I haven't got much more than I already put into it. I had very little in my pocket, having earned very little, despite having worked a lot. It was my chosen pathways that dictated my financial status, but I remembered the comment all the same. And I tucked it away into an envelope and I mailed it to my future self."

Well, Joseph goes on, "Eventually I would find that letter, open it, give wealth a chance, give it the old college try. First, it was starting to invest The Foolish way in a small way that opened up not only a world of financial education to me, but also a virtual community of fun-filled enthusiasts to share it with through my earphones, mostly as I go about my daily life in the real world while listening to Chris Hill, Jason Moser, Alison Southwick and Robert Brokamp -- with us today -- and the gang of ... " what Joseph calls, " ... the IF wonder kids." [laughs] I guess that's our Industry Focus team, the wonder kids. That's too kind, Joseph.

"My big move ... " he goes on, " ... came after a couple years when I realized a few important things. The first is, if you don't have questions then you don't know what you're missing. And the second lesson is that you can fool yourself into thinking you know what you're doing when swimming in new waters. Knowing what questions to ask was the second lesson that I stumbled over. I'd ask my accountant just such a question before leaving the United States for a new life in Italy. If I'd have to pay taxes going forward from 2006? I interpreted his answer with glee, I hadn't bothered to ask if I could continue to contribute to my Roth. So, I mostly drained it to instead contribute some cash to my new married lifestyle." By the way, when you hear that, Robert, what thoughts come to mind?

Brokamp: [laughs] Draining the Roth at that age. At first, I'm a little concerned about Joseph, but I think the story has a happy ending.

Gardner: [laughs] "It was a half dozen years later when I learned Americans abroad still had to file tax returns even if they may owe no taxes, and penalties for not doing so were steep. So, long story short, I found an accountant over here, filled three of the missing years, a catch-up possibility, and delightfully found I was due refunds from child tax credits." Ah! the wonderful world of taxes and the U.S. tax code. And I have to admit, I don't have experiences like this, Robert, so, I don't know how complicated it gets to live abroad.

Brokamp: Very complicated. In fact, one of the smart things that Joseph did was get an expert, because the U.S. is one of only two countries that require you to file a tax return even if you're living overseas. So, you do have to do that. You may not owe any taxes due to the foreign-earned income exclusion, but that's complicated. But then you have the issue of living in the other country. And if you live in most countries for six months and a day, you have to owe taxes in that country. So, it gets very complicated. Definitely it makes sense to get an expert.

Gardner: Alright. Well, he continues, "All of a sudden I found a new small annual revenue stream thanks to my kids. And I also learned I could grow my Roth and even make it into something more than the $400 it had left in it seemed to suggest. I was closing in on 50 years old, I had no time to waste."

"Well, the biggest realization was yet to happen, Joseph writes, that may have initially come from Bro on the Answers podcast, that is that I resurrected a tiny 403(b) IRA, I had begun to feed it dozen years earlier, but after leaving a full-time job to follow a dream to teach, stopped saving after only a handful of years of contributions. It had about doubled passively over all those years, but it was still nothing to write home about. I resurrected it, sold the funds it was holding, made it a Foolish investment vehicle in 2016. I still own the bulk of those initial stock purchases which form the bedrock of my retirement savings with small but constant additions to the Roth, I eventually rolled the IRA into the Roth. Thank you, Robert Brokamp." He writes, "And a small individual account on the side, mostly to interest my kids now, my equities have grown a respectful base for a family man in his mid-50s with more than a dozen multi-baggers across 50 or so equities." Wow! Listen to that progress, just remarkable.

He says, "My top Foolish holding from 2016 is now worth substantially more than my entire 403(b) savings was worth. My retirement nest egg has grown to more than 750% above my initial retirement savings. Wealth is beginning to look like more than an improbability. Well, in closing ... " Joseph says, " ... I'm very open about my experience and freely share the parts my students would benefit from hearing, friends and family too. In fact, I now manage half-a-dozen savings and investment vehicles that provide emergency peace of mind, income for those who need it, and growth, lots of that for ... " sounds like a circle of family and friends around him. And he closes, "I love it. I love my delightfully Foolish life and merry virtual community of optimists, believers in the financial success our rich human history has afforded us. Why not learn about the world in which we live and derive the know-how to succeed and help others win too? My financial hack then is simple, that aggregating and putting to work a bit of capital I earned in the past, together with the habit of adding even a little bit actually creates what could become a bedrock on which I too could build wealth, is the lesson that I've learned from The Motley Fool. Oh! And did I say, it's been a barrel of laughs, and that too. After all, doing it all for love and laughs is what we're here for, isn't it? Thanks for the years of juicy stock picks, joy in our hearts and Foolish jive, your virtual friend, Joseph."

Well, obviously, Robert, you were a key catalyst in a number of decisions that he made. And I'm just so delighted to hear your story, Joseph, because while it is your story, we're able to share it with so many people who are going to get to hear it and be inspired by it, but you also made it count for those around you. And even, sounds like, the students that you have in Italy today, as an American expat teacher abroad, are getting to learn of the benefits of saving and investing.

Robert, any closing thoughts from you?

Brokamp: Yeah, it's just so gratifying to hear that something that we're talking about is helping someone. I have to honestly say that I often refer to the financial planning stuff that I talk about as, kind of, the broccoli of The Motley Fool's guidance, because all the stuff about taxes and retirement accounts, it's not nearly as exciting as stocks that grow 750%, but it's still important. So, it's so great to hear someone like Joseph who's basically eating his financial broccoli and it's paying off for him.

Gardner: And isn't it great, and he clearly learned it from you and from our company, and -- I mean, you have to have structures in place, right? You have to do things properly, [laughs] including paying taxes, even, if you're an expat, in some situations. But, Robert, it is actually, kind of, a wonderful joining of what you do and what I do together in this story to close this month's mailbag. So, I simply want to say to you, Sir, thank you.

Brokamp: Well, thank you, David; that's so nice to hear. And I want to say thanks to Joseph. I mean, it's such a great story. Basically, the bottom-line is he took control and he did it at an age, if I got the timeline right, mid-40s, like, some people might say, oh, it's too late, but it wasn't too late. He took control by getting his money out of his low-returning 403(b) by choosing a Roth, which means his growth will be tax-free as long as he follows all the rules. He's continuing to learn and he's sharing his knowledge with people. I mean, he's the quintessential Fool.

Gardner: Well, thank you, and thank you, Robert Brokamp, and for your work on Motley Fool Answers. And I'm just imagining all the people who are hearing you say this, and thinking about, maybe some of the structures and things we just talked about that they don't understand, is this the sort of thing somebody can just google " retirement planning" or " Roth IRA" and start to find some of your write ups and content on this subject?

Brokamp: Yeah, absolutely. In fact, there's a retirement tab on where we have a whole suite of financial planners or financial experts who write about this. I often read the retirement planning content on The Fool, because it is solid. And then, of course, there's the Rule Your Retirement service that I've been the lead advisor of for more than five years which has, sort of, more in-depth content as well as model portfolios, mostly filled out with ETS, but there is still a pretty broad guideline in terms of how to invest your money even if you're picking individual stocks, how much to have in stock, how much to have out, international versus U.S., those types of things, as well as, all the topics that Joseph touched on; taxes, retirement accounts, social security, choosing the Roth over traditional things that may not seem very exciting, but they actually, if you make the right decision, it could lead to tens of thousands of dollars down the road.

Gardner: I'm always happy to be to plug our own services, because I'm a big fan of what we do, but if you think about the pretty low cost [laughs] in comparative terms of Rule Your Retirement and then you just think about stories like Joseph's and how much that can lead to, it's very clear to me that for people who are at that stage of life, who need that kind of guidance, wow! I'm not sure you can find much cheaper, better out there.

So, anyway, Robert Brokamp, thank you so much for joining with me once again. And, hey, wash your darn hands.

Brokamp: I'll do my best. Thanks, David.

Gardner: Well, and another one for the books, the May 2020 Rule Breaker Investing mailbag is complete. Just going through the numbers, our first one was right around Thanksgiving of 2015. So, my schoolboy math puts this at the 59th mailbag, which makes this particular episodic series the most prolific and longest running one [laughs] on this podcast. A delight, again, to share your questions, your inspirational stories and thoughts.

And I'll just say, coming up in June, since June is just about upon us. While I'm not exactly sure what we'll be doing next week, I'm pretty sure about the week after that. Yep, it'll be my latest Five-Stock Sampler coming on June 10th. We'll also be reviewing a few other samplers as well, and of course, the market cap game show, I mentioned that earlier, we would be playing the latest installment of that along with all the other things that June holds for us.

We'll hope that the market continues to enjoy its special rise, although, I think it's also fair to say that if the market wants to take a summer breather, nobody will really object. But as our friend Daniel said earlier this episode, it isn't about the next six months, is it? I sure hope it isn't, it isn't for me, it's about the next five, 10, and 20 years. And I'm so glad that you're investing like me, like a Rule Breaker. Have a great week and Fool on!

Allyson Wines owns shares of Apple, Shopify, and Zoom Video Communications. David Gardner owns shares of Apple, Netflix, and Tesla. Jill Ralph has no position in any of the stocks mentioned. Max Keeler owns shares of Apple, Netflix, Tesla, and Twitter. Rick Engdahl owns shares of Apple, Netflix, Roku, Shopify, Tesla, and Zoom Video Communications. Rick Munarriz owns shares of Apple, Netflix, Roku, Teladoc Health, Twitter, and Zoom Video Communications. Robert Brokamp, CFP owns shares of Tesla. The Motley Fool owns shares of and recommends Apple, Netflix, Roku, Shopify, Teladoc Health, Tesla, Twitter, and Zoom Video Communications. The Motley Fool recommends Beyond Meat, Inc. and Sea Limited and recommends the following options: short August 2020 $130 calls on Zoom Video Communications. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$150.77 (0.23%) $0.34
Netflix, Inc. Stock Quote
Netflix, Inc.
$224.07 (-1.03%) $-2.34
Tesla, Inc. Stock Quote
Tesla, Inc.
$276.01 (0.25%) $0.68
Prudential Financial, Inc. Stock Quote
Prudential Financial, Inc.
$87.34 (-1.51%) $-1.34
iShares S&P 500 ETF Stock Quote
iShares S&P 500 ETF
$365.87 (-0.99%) $-3.64
Twitter, Inc. Stock Quote
Twitter, Inc.
$41.52 (-0.14%) $0.06
Shopify Inc. Stock Quote
Shopify Inc.
$28.25 (-1.77%) $0.51
Teladoc Health, Inc. Stock Quote
Teladoc Health, Inc.
$26.42 (-2.04%) $0.55
Roku Stock Quote
$58.18 (-2.84%) $-1.70
Zoom Video Communications Stock Quote
Zoom Video Communications
$73.33 (-1.50%) $-1.12
Beyond Meat Stock Quote
Beyond Meat
$14.54 (-7.33%) $-1.15
Sea Limited Stock Quote
Sea Limited
$53.97 (0.30%) $0.16

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