The talking heads who cover the stock market would have you believe that investing is all about making simple, black-and-white decisions. Buy this stock and sell that one. This industry is in, that industry is out.
For the everyday investor, that sort of logic is as dangerous as it is seductive. Investing would be a lot easier if every decision came down to a simple "yes" or "no," which is why we want to believe the people on TV.
But if you intend to beat the market, then you have to break out of this simplistic way of thinking and learn the real story behind an investment -- because the best stocks break all the rules we expect them to follow.
In the video below, David Gardner, Co-Founder of The Motley Fool, discusses his Rule Breaking Investing philosophy. A full transcript follows the video.
David Gardner: Beware of binary thinking. It happens all the time. You do it, I do it, the media does it, but it hurts our investing results. "Buy! Sell! Win! Lose! Distribution is king. No, content is king!" This kind of oversimplification is going to hurt your results as an investor because the truth is, the world doesn't work that way.
I think this comes from sports. On Sundays a lot of people love to root on their football team, and they know that one team is going to win, and one team is going to lose. But the truth is, in the business world, things don't work that way. For example: The iPad did not kill the Kindle, and Samsung's new tablet didn't kill the iPad.
In fact, the one company that demonstrates the best thinking for us as investors is Netflix. It didn't fall into the "content is king" paradigm or the "distribution is king" paradigm. What has Netflix done? It's become not only a great distributor, but a great content creator as well.
So don't think binary. Whether you're an entrepreneur or an investor, see the nuance -- and profit.
I'm David Gardner, Chief Rule Breaker here at Fool.com. Fool on!
Disclaimer: As always, people on this program may have interests in the stocks that they talk about, and The Motley Fool may have formal recommendations for or against. So, don't buy or sell anything based solely on what you hear. Learn more about Rule Breaker Investing at RBI.Fool.com.