Q: Why did you decide to write this book?

Tom Gardner: Our investment approach has become substantially more sophisticated since we last published five years ago. We also found our way to a great publisher (Collins), who encouraged us to update our strategy. The gut-wrenching decline in the markets have only convinced me more of the importance of having the right investment strategy, tied to finding the right companies and mutual funds, invested for the right time period (five years or more).

David Gardner: It was time to go back to the bookshelves. As Tom mentioned, it had been five years since our last book. Of course, when we started writing, we anticipate what would happen in the financial markets at the end of 2008. I wish we had – I would have prevented myself from losing a lot of money! But it turned out to be the perfect time to release this book. Some smart investors I know feel that all the old rules have gone out the door. I disagree. One thing this book does is remind you about dividends, where you are actually buying the profits of a corporation as an investor, not a speculator. That’s a time-tested strategy.

Q: How is Million Dollar Portfolio different from previous Motley Fool books?

Tom: This is far and away our most comprehensive book to date. It includes all of our investment thinking, covering everything from growth stocks to value stocks, small-caps to large-caps, domestic stocks to international stocks, and across the entire world of mutual funds. It stands as our playbook for investing in the right stocks around the world.

David: Exactly. Our previous books generally advocated one approach, which has evolved over time. Rule Breakers, Rule Makers was so much fun for me to write because I got to put into writing what I had learned as I developed my investing style, which had begun to differ from Tom’s. This book takes that idea much further, showing that there are many ways to succeed in investing. You can find a number of different winning approaches to fit your style. It’s also the first book to talk about CAPS, which is exciting.

Q: What is the No. 1 lesson you want readers to take away from The Motley Fool Million Dollar Portfolio?

David: I think it’s what I just said – that there are many ways to beat the market in a way that fits with who you are. Anyone familiar with Stock Advisor has seen that Tom and I have used different strategies very successfully. I think we’re a great example of this.

Tom: I want readers to remember that you cannot make money quickly in stocks. Those who have tried – through day-trading and high leverage – are vanishing right now. You have multibillion-dollar investment banks with multi-decade histories that are collapsing because they gave leadership responsibilities over to the traders.

They tied virtually all of their incentive plans to the short term. One of our board directors, Steve Kerr, who ran the internal universities at General Electric (Crotonville) and Goldman Sachs (Pine Street), is fond of saying, “The problem with incentives is that they work too well.” Those short-term incentives have created a lot of wealth for individuals inside those firms simultaneous to destroying their entire corporation and hurting their customers.

Warren Buffett is right. The correct short-term capital gains tax rate is 100%. You need to restore the public markets to fulfill their true purpose – to fund companies designed to create permanent value. All of the wealth goals should be tied to the long term – 5 to 10 years and out.

Q: What’s your advice for those people who pulled their money out of stocks during the recent market drop and are waiting for the market to rebound?

Tom: If you have less than three to five years to invest, that money should not and should never be in the stock market. I think those who invested and held through the downdraft and have a at least a five-year time horizon will be fine. The pain is if you have to sell at the bottom. And so I believe that if you have money that you can put away for five years or more, investing in well-chosen mutual funds and stocks makes a great deal of sense right now. There is fear everywhere in the market. These are the times to invest.

David: There’s no single answer. Some people made a great mistake; others did what they should have done a long time ago. The former acted out of fear, they got out but they paid for it in capital gains. It’ll be hard for them to make up for those losses. The latter group was invested in stocks they probably shouldn’t have owned, stocks that didn’t fit their time horizon. It’s good to sell in that case.

Q: What is one industry or sector that you think is poised to have a strong 2009?

Tom: I really don’t have value to add on a one-year time horizon. But looking forward 3-5 years, I think online learning, energy, video conference, home entertainment, and membership companies (like Costco) offer a great deal of promise. I also believe that long-term investors should be using our Global Gains service to ensure that they have sufficient exposure to international markets.

David: I don’t time sectors – I’m always as surprised as anyone when a sector I own does well or falters. That’s why I own so many stocks. I could make up an answer, but I wouldn’t want anyone to invest according to it!

Q: What is one thing every investor should do in 2009?

David: Be true to yourself in your investing. If I come over to your house and scan your bookshelves, I should be able to get a sense of who you are by the books that you own. The same is true of the stocks you hold. They should say something about you. That’s not advice specifically for 2009, but it’s a good opportunity to highlight it.

Tom: Be grateful for what you have every day. Cut frivolous spending and replace it with meaningful living. And find the right people to invest with and in – from the right fund companies to the right CEOs to the right advisors.