Thursday, September 7, 2017

Gardner, The Motley Fool Investment Guide, 3d ed.

The Motley Fool will probably always be most closely associated with the 1990s and the roaring stock market. But their business is still going strong. And so now, for the third edition, David and Tom Gardner have completely updated their classic The Motley Fool Investment Guide: How the Fools Beat Wall Street’s Wise Men and How You Can Too (Simon & Schuster) for a new generation of investors.

For those with the motivation and the proper temperament, the Gardners advocate stock picking over index investing. They are partial to small caps and recommend “’business-focused investing’—that is, seeking out great and amazing growth-opportunity businesses.”

Tom Gardner, in constructing his Everlasting Portfolio, considers five features of companies: culture, strategy, financials, safety, and valuation. David Gardner is more aggressive. He advocates Rule Breaker investing, which is about “seeking growth in dynamic companies that are disrupting and shaping industries, businesses, economies, and even our daily lives.” These companies are the first movers in important and emerging industries, they have visionary leadership and smart backing, they have identifiable competitive advantages, they’re good brands, their stocks have already done pretty well, and stodgy backward-looking observers will declare their shares overvalued.

After the authors take the would-be investor through some basic accounting principles, they introduce advanced topics, such as shorting stocks and options.

To the new investor, the authors say “there’s no rush. Consider starting with an index fund or some blue-chip stocks exclusively in your first year. … When you’re convinced you can outdo index-fund investing, and you’re confident you have the timeline and temperament to stick with it even when things don’t go your way, explore the worlds of Rule Breakers, small-cap stocks, and other corners of the market that might appeal to you. Find your edge, and then over time, push your edge to the edge.”

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