“Rule Breaker Investing” October Mailbag: Listeners Have a Lot to Say

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In this mailbag edition of Rule Breaker Investing, we talk about investing, business, life, and death.

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 Oct. 26, 2022.

David Gardner: What do great quotations, a tennis player, and horror stories have in common? Well, if you’re a regular listener of Rule Breaker Investing, you already know the answer. Those were the three podcasts we shared together this month of October 2022. It’s a short month. This is the fourth and final Wednesday of this month, which means it is the Rule Breaker Investing mailbag for October 2022. Let’s get into it, only on Rule Breaker Investing.

Welcome back to Rule Breaker Investing I’m delighted to have you join me. Yes, at the top I mentioned it’s a short month. In fact, it’s a thin mailbag this month. I guess I should prompt my dear listeners, the email address of course is [email protected] In fact, I’m going to pound that one home once or twice more this week because next week, we’re inviting your participation. It’s going to be Mental Tips, Tricks, and Life Hacks Volume 7. I will say ahead of time, I already have a locked and loaded list. I like my tips, tricks, and life hacks next week. But one of The Motley Fool’s core values is basically top it. The idea is probably anything can be improved. I’m quite sure at least one of you has at least one tip, trick, or life hack better than my list and I would love to include it on next week’s show. Mental tips, tricks, and life hacks next week on Rule Breaker Investing, and again, our email address is [email protected] You can also tweet us @RBIpodcast, would love to include your best idea. Well, this week we did kick it off with the 15th in my episodic series Great Quotes. So it was Great Quotes Volume 15. Thinking back to that one, I’m just going to reshare one of them now because it keeps coming back to me and I just agree with her so much. Here we go. I think this was the first one in the episode from Wendy Kopp from her Princeton Baccalaureate speech, basically her graduation speech earlier this year. Wendy, the founder of Teach For America, said and I quote, “In this era, there’s more attention than ever, especially among your generation,” she said, speaking to younger people, of course, “on personal well-being and finding balance.

“What I’ve seen,” Wendy Kopp said, “is that the highest form of well-being is the exhilaration that comes from immersing ourselves in things that matter. The path to happiness is not balanced per se, but rather congruence between the values we hold most dear and where we spend our energy.” So that and more from Great Quotes Volume 15, earlier this month. Then we got to know Sem Verbeek, the Dutch professional tennis player who also happens to be a Fool and I won’t even say a closet fool. He’s very much an out there Fool among his tennis peers. He’s known as the guy who’s there to help them with their money, personal finance questions, getting started investing. Sem had a realization in his late 20s, where he is today, that not enough professional athletes, and again, often we think of them as very wealthy people. But really, if you think about the tennis tour, even the golf tour, there are a lot of people who are scrapping to make it from one week to the next. Not enough of them, he realized, understand money and investing. It was a delight to hear some of his life story, where he is now. We got some tennis tips, we got some investing tips, of course, as well. Then last week, delightful and horrific week, Robert Brokamp, longtime Motley Fool contributor, sharing seven horror stories, largely centered on people who didn’t do their will or didn’t do their will sufficiently. Rick Engdahl brought the requisite sound effects. It was a horrific week, and I do hope that one gets some pass-around.

Please scare your spouse or maybe your parents. Please just nudge that URL, that podcast their way because Financial Horror Stories Volume 1: Memento Mori is there ultimately to create great effects. Sometimes we need to be scared into doing the right thing and filling out our will, I know you’ll get to it someday. How about today? Filling out your will can be of so much benefit to those who care about you and are connected to you going forward. A couple of hot takes from Twitter. The first one from Andy Courtwright @ACourtWR8. Looks like one of those leet-speak license plates. Well played, Andy, @ACourtWR8. “Fun?” You wrote, “Informative and interesting, yes. But fun? Thank you @RobertBrokamp for the scary stories. I think I’m set, but this episode gives me reasons to review. There goes my Saturday.” Well, since we’re recording the week after, I did encourage all of you to do your will today. Sounds like Andy updated his a few days ago, so some of us are really on the ball. Sorry if that cost you a portion of your weekend, Andy, but I think we’re both nodding our heads that it was time well spent. Yeah, I do think it was fun. I think that was one of our more fun podcasts of the year, I hope you will agree.

One other hot take, this one not an incoming tweet, but rather just a note from a concerned fellow Fool, longtime listener and often mailbag contributor, Jason Moore, whose screen name on Twitter is @JimminyJilickrz, is going through a little bit of a tough family time. I’m not going to share that, that’s his private note, but it wasn’t even my initial idea to say anything here. It was another Twitter and Fool friend of yours, Jason, who said David make sure you give Jason little props. Jason, I want to give you some props. I hope the family situation that you were working through right now resolves itself well. Your family is so fortunate to have you, somebody who is so wise, so carrying and so good. So best wishes with the situation, Jason. We’re all pulling for you. Fool on.

Rule Breaker mailbag item number 1. This one comes from Kerry Prep. Thank you for this, Kerry. “I’m looking to increase the number of stocks in my portfolio. I’m currently overweighted in one stock. I plan to sell about 50 percent of that stock. After I allow for capital gains tax, I will have enough to purchase an equal amount of money in 10 additional stocks, which would increase the number of stocks I own and make my portfolio more balanced. As a longtime subscriber to Stock Advisor,” Kerry writes, “I’ve done my due diligence. I already have 15-20 stocks on my watch list. They vary in terms of industry and market cap size. I am an investor, not a trader. My investment horizon is five-plus years.” Kerry goes on, “I currently see three options. One, purchase shares in all 10 stocks at the same time.

That would be fairly immediate,” Kerry writes, “as I would not be looking for a pullback that might never come. Option No. 2. Over the next five months, purchase shares in two companies each month. By the end of the fifth month, I will reinvest all the money available to me based on the original sale of shares from the overweighted stock. Or finally, option No. 3, door number 3, if you will, dollar-cost average in by purchasing shares in all of the companies with 1/5 of the money available to me over the next five months.” Kerry closes, “Is there another option I’m not considering that might make better use of reinvesting the money? The five-month strategy is completely arbitrary, instead of one stock each month over 10 months. I don’t want to wait too long to be fully invested again.” Thank you, Kerry Prep. Well, let me start my answer by saying congratulations on making a good decision. It sounds like you are overweighted in stock and while it’s OK for some of us to be somewhat overweighted in some stocks, we’re all different and one person’s overweight is someone else’s way, way too overweight. I know a lot of people who won’t allow their portfolio to get overconcentrated in anything.

They sell off, often selling off some of their best stocks to keep them at lower allocations. While I don’t think that’s the optimal strategy if you want to maximize your profits over the long term, for a lot of people, it is optimal for them because of their mindset and they’re a little bit more conservative or cautious, or they want to stay highly, highly diversified for reasons that are pertinent to them. The funny answer to your question, Kerry, is that all three of your options are excellent. Any one of those I would be fine with. In every single case, you will be fully invested within the next five months. In the first option, that’s the only one that happens right away. Now, mathematics and probabilities will show that that’s typically the winning answer. Because since the stock market tends to rise, and as we know, it tends to rise 9-10 percent a year, which means from one month to the next, any given month, it would typically be rising. For every month that you wait, typically, you’ll be paying a little bit of an opportunity cost not investing money that’s sitting outside the market that you could have put in the market. Now, the concept of a rising market has become somewhat alien to many of us over just the last 12 months. The stock market has not just been volatile; it’s been very bad. I’ve made a big point of mentioning that I’m down about half from where I was a year ago, which doesn’t feel good, and yet I felt it before and I know, with the years ahead of me, I’ll feel it again because these things happen if you’re playing the only game that counts, Kerry, and I know you are, the long game. Matt will suggest and probabilities will suggest that you should put all of that money in now, even though many of the last 12 months, that wouldn’t have been a good move or felt very good a month later. But we’re not playing the months game, we’re playing the years game.

A reason not to do option No. 1 is if it just feels too all at once, too all in or all out, too binary. For a lot of people, they prefer dollar-cost averaging. Often we’ve said invest in thirds, you’ve proposed investing in fifths, and I think that’s a perfectly valid approach as well. The stock market has been volatile. You would’ve been rewarded for putting it in piecemeal over the previous five months instead of all at once. If you want to use a rearview mirror and be a little bit more conservative, I think dollar-cost-averaging over time is just fine. Then whether you choose to put it in a couple of companies at a time and fully allocate to those companies, or if it’s not too much strain and it’s easy enough and you’re not paying too much in costs, if you want to dollar-cost average into all 10 of them 1/5 at a time over the next five months, I think that’s a very good approach as well. So the good news is I can say yes, yes, and yes to all three of your options. I don’t think you need a fourth option. I think you have an excellent Foolish head on your shoulders, and I wish you the very best. I bet this works out well five-plus years from now.

Rule Breaker mailbag item No. 2. Oh my God, this one comes from Kerry Prep. Yes, I did notice, Kerry, you wrote me two notes and I figured why not put them back to back for this mailbag. Thank you for this one, and now for something completely different, Kerry. “You wrote on your most recent podcast, Memento Mori, that was last week, you spoke about Marie Kondo’s principles of organizing and tidying up. Her book, of course, The Life-Changing Magic of Tidying Up, and to include mementos and memorabilia to give you and your loved ones peace of mind. It reminded me,” Kerry writes, “of Margareta Magnusson’s book The Gentle Art of Swedish Death Cleaning,” which, I’m going to do my best here fellow Swedish dostadning, something like that. Swedish Death Cleaning, a topic I had not previously heard about. Kerry goes on, “This is where the elderly and their families in Sweden set their affairs in order by decluttering so that you not only make the later years of your life as comfortable and stress-free as possible, but your death is not a burden to those you leave behind.” Kerry closes, “Between this podcast and Michael Hebb’s, let’s talk about death over dinner earlier this year on Rule Breaker Investing.

You certainly live up to your mission statement of making the world smarter, happier, and richer. Thank you for all you do best. Kerry Prep.” Well, thank you, Kerry, for this lovely note. Well, I don’t have a lot to add here other than I know some of my Swedish fellow Fools are nodding their head saying, “Yes, of course, dostadning. I’m glad that that finally showed up on this podcast. David has been talking about cleaning up, David has been talking about death, he finally got to The Gentle Art of Swedish Death Cleaning.” Again, this a book I have not read, but I can already tell I would like it because what I’m hearing from you, Kerry, is that this is a book teaching the principles of leading a life of simplicity and especially the older that we get to simplify. I think that that’s a little bit countercurrent. I think that’s a little bit Foolish because the tendency is for us to amass things over the course of our lives and end up with more and more stuff and needing more and more closets. I think I’ve just described myself so far from age 0 to age 56, but somewhere between 56 and when I die, I really do intend to slim things down and simplify, not only just to reduce stress, which you’ve pointed out is one of the great benefits of the gentle art of cleaning in our older age, but also, of course, to make things simpler for those who would have to pick up after me.

Thanks, Kerry, for that heads-up. This podcast is always mentioning books for many different reasons. This sounds like another recommendation that I bet someone listening is going to pick up, read, and benefit from. Thank you again for that note and reference. Rule Breaker mailbag item No. 3. This one is technically a Twitter hot take, but because it has a little bit more depth to it, I thought it’d be much better to feature here. There was an exchange on Twitter just a few days ago that started with my good long-term friend and fellow Fool. She’s written for the Fool for so many years, Selena Maranjian, just tweeting out a beautiful quote from Reverend Warnock, “A vote,” because it’s that voting time of year, “A vote is a kind of prayer about the kind of world you want to live in.” Matt Rantala, @Sisu_Runner on Twitter, you pointed it my way and you compared it to my line, of course, make your portfolio reflect your best vision for our future. I appreciate you connecting those things because I think they’re very close, they’re very similar. A vote is a kind of prayer about the kind of world you want to live in. I’m certainly here to say, hey, everybody, get out and vote. Especially those of us who are American here in November, you have a great opportunity to strengthen our democracy and to get your vote in. Yet, since I think we all already get that for the most part, I wanted to add a little bit of a contrarian point or thought as well because that’s what I do.

As a fellow Fool, if I see conventional wisdom and I have an additional insight, sometimes I want to make sure I share it. Otherwise, it might be missed. So I tweeted back out and I’ll just read it right here and then briefly reflect on. I tweeted back out, and while it’s probably contrary to point out, “The votes we give every single day with our consumer dollars and investing dollars so far outnumber and I think outpower the political votes we occasionally give a few times a year if that.” Now, all of this matters. Every vote counts, and I love living in a democracy. There’s nowhere else, no place, there’s no other system I want to live under. My life has been so dramatically improved, and especially if you’re American, I think yours has too, relative to so many other systems in place in the world today and throughout history. Pinch yourself, fellow Americans, and yet let me point out that every single day, not just once a year, you and I are spending dollars. That truly is a vote. Every time you spend a dollar on a particular product, you just voted for that product, for that industry, and for the company that you chose to spend it on versus its competitors. That is a powerful vote and it’s being done constantly. There is a wonderful phrase called conscious consumerism, and Paul Rice, who started Fair Trade, he invented Fair Trade. A lot of us know Fair Trade coffee, for example, Paul Rice on this podcast a few years ago, broke down conscious consumerism for us.

But he just pointed out the importance of how we spend our money and where we spend our money, to whom we give our money. As I’ve often tried to say since it really does breathe life into the things that we vote with for our dollars and in a little way kills the things that don’t get our dollars instead. While I just put that tweet out there, I thought I’d add a few more thoughts here on the podcast on this same topic. I think there are five things that I see that are more powerful when it comes to my dollar votes than my political votes. The first is, I just spoke to, it’s more frequent, we’re constantly doing that. The second is those votes that are dollars build our economic system. I think that they’re significantly more powerful in many cases than the vote that you might cast for your local politician or even at a federal level. There’s much more one-to-one between what you’re doing and how the world reacts when it comes to your dollars. Of course, when I’m talking about dollars, I’m emphasizing your consumer dollars, that’s something we’re all spending. But to this audience, to you, my fellow Fools, so many of you are investors as well, which means you’re investing dollars. What stock you choose to buy or the fund you choose not to buy, all of these things really matter, too. When you think about your consumer dollars, combined with your investing dollars, that is very powerful. A third thing I want to point out is, for me anyway, I bet for you too, how you choose to spend your money is much more intimate, and personal, and reflective of you than the political vote that you cast. You really have a way of showing who you are in all of your nuances through your credit card statement every month than with that vote for or against yes or no for this party or that party.

That feels like a dull instrument in relative terms. I hope I’m helping you see, maybe swaying you to see that the dollars that you’re voting with are the most powerful votes that you can send generally day-to-day over the course of your life. A couple more things I’ll point out here. There’s a lot more diversity usually in how you can spend your dollars than how you can vote. Sure, I guess you could write in anyone, but most elections, at least in the US, come down to two, occasionally maybe three candidates. There’s not a lot of nuance when you only have 1, 2, or 3 choices versus the many choices that we make when we spend our money. Finally, I do think ultimately it’s more effective. I do feel as if when you spend your money toward a company, you are building their profit. When you ignore another company, you are hurting their profit, and their profits, their income statements, their statements of cash flow, ultimately their balance sheets, in my experience anyway, maybe not yours, but in my experience, are more sensitive. They react more and it matters more than officials that we might vote in or not to various responsibilities who may or may not fulfill the promises that they made during the campaign that often were a basis for a vote that we gave.

The effectiveness in the one-to-one direction of your dollars and the future that we’re creating together, for me anyway, even in this election time of year, I’m reminded of the other 364 days each year and the power and importance of that. I hope you, as a fellow Fool and a Rule Breaker, can see that, too. Rule Breaker mailbag item No. 4. This podcast is free, first of all. We’ve all noticed that it’s free, we are in our eighth year. Thank you, Rick Engdahl, for an eight wonderful year of partnering to offer free tips about investing, about business, and about life. This falls into the last category, their life, and it’s from Jeff Krosschell and it’s quick. But for at least one Fool, Jeff Krosschell, it’s one that just keeps on giving. Jeff, I think you submitted this in advance of mental tips, tricks, and life hacks next week. So I won’t be featuring it next week, I’m featuring it this week as a preview of what we’ll be doing next week. I hope I’m not overstating. This isn’t a life-changer unless it is. “David, still rocking the tip that Clark Howard gave Chris Hill on shaving razors. Wipe the razor dry with a towel when you’re done to keep it sharper longer.” Jeff concludes, “I use the same razor for months.”

There you go, Fools. It works for people of all genders. Anybody who uses a razor for any reason, you can make them last longer. Clark Howard, of course, the longtime Georgia radio and national radio personality, full of wonderful personal finance tips and a frequent guest over the years on Motley Fool Money and other Motley Fool properties. So shout out to Clark, shout out to Chris, and thank you Jeff Krosschell for maybe changing some lives with that trick this week. It is a reminder, [email protected] is the email address. We’re accepting mental tips, tricks, and life hacks for the rest of this week in advance of recording next Tuesday. Rule Breaker mailbag item number 5 again of 6, as I mentioned earlier this week. “Hey, David, long time, many times,” and this is from PT Lathrop and, PT, thank you. It has been a long time and you have written in many times, and I’m pleased to share this one. “It’s been a while. I know how passionate,” PT writes, “you are about conscious capitalism. I was hoping with the backdrop of inflation and market uncertainty, rates, inequality, etc., you might be willing to speak to money versus goods. I sadly heard an acquaintance say, ‘My family needs the money,’ not to downplay that reality,” PT writes, “but no, knowing them, they don’t.

They, like all of us, need shelter, dignity, food, sustenance, safety, a degree of comfort, electricity, healthcare. Those are all things we need. Yes, money is the mode of transaction and, of course, we all should endeavor to help our fellow humans always, especially when they need it. But I think as a larger community, we need to think about bringing abundance to all, and that means business. It’s really three paragraphs for a very age-old spectrum of worldviews. I just think the solution to housing prices and accessibility, to healthcare, to education, to transportation, heating is not more money; it’s more technology, more new houses, more healthcare providers, more abundance, not more money. Thank you as always, curious for your thoughts. PT Lathrop.” Well, PT, I think you know that I share an abundance mindset. It’s not the only way to think. I think sometimes every yin needs a yang.” But for me, yes, I also favored the idea that we need more. I don’t like zero-sum answers that make it sound like if one person profits, somebody else loses. That’s really not true of so much of life, especially capitalism. Capitalism is often portrayed as a zero-sum winner-take-all game that creates misery and losers, and while there is misery in this world for many different reasons and some of us are winners at different points in our lives and losers, other times we’re all winners and losers.

The real truth, as you look at the history of capitalism and the benefits it’s given us, especially over the last three centuries, is a win-win mentality. The buyer wins buying something she really wanted, the seller wins by selling something she needed to sell, maybe, PT, to raise money for that particular reason. Transactions when they happen voluntarily, which is the vast majority of them worldwide every day, happen most of them because both sides were willing to do that, and conscious capitalism, it’s ironic perhaps that I’m doing the podcast this week from Austin, Texas at the Conscious Capitalism CEO Summit, which I attend every year here in October. It’s a delight to be back in Austin. It’s a bit of a shorter podcast this week for that reason, but conscious capitalism and a wonderful book by Raj Sisodia and John Mackey entitled Conscious Capitalism, for anyone who’s not read it, reminds us that the win-win-win is the only ethical transaction. You win, I win, and the environment wins, or the world wins, or our community wins when we can cooperate together and create wins for each other. Since I guess I’m full of book recommendations this week, why wouldn’t I include another one that I haven’t read, and that’s the book Mindset: The New Psychology of Success, it’s by Carol Dweck.

Now, many of you will have read this book even if I haven’t yet, but Carol Dweck is famous for writing about the growth mindset in contrast to the fixed mindset, the subtitle of her book, how we can learn to fulfill our potential in parenting, in business, in school, in relationships. The growth mindset is very analogous to an abundance mindset. So I’m going to recommend for anybody who had not previously heard of her work or more specifically of the growth mindset in contrast to the fixed mindset, the sense of win-win-win and abundance, which supplants, in so many ways, is often superior, not always, but often superior to a fixed zero-sum trade-off mindset. That, for me, personally, has been one of the great keys to success and to happiness. I realize a lot of us have different mindsets and different orientations. I’m just sharing what’s worked for me. Thank you, PT Lathrop. Good to hear from you again. Finally, Rule Breaker mailbag item number 6 this week from Matt. Matt writing in, “We know you love fast-growing Rule Breakers, but how do you think about steady Eddie blue chips? What’s an example of a great blue-chip stock that appeals to you?” Well, thank you for that, Matt. Blue chips, well, let’s first break down the etymology. I needed to check this one myself, but the term blue chip used to refer to more reliable companies, more reliable stocks, US-based term actually derives from the card game poker.

The simplest sets of poker chips include white, red, and blue chips with American tradition anyway, dictating that the blues are highest in value. So that’s where the phrase blue chip comes from. The world I grew up in, so 30 years ago or so, people would have said IBM was a blue chip back then. That’s just a quick example of a great old American company that was reliable both as a stock and by all those purchasing decisions when you were in the corporate boardroom and you’ve got to deliver the line, “Can’t go wrong buying IBM.” So the reliability of the company and the stock probably not the same today, but I sure do still celebrate finding blue chips and adding them to your portfolios. Over the many years that I helped run Stock Advisor and Rule Breakers, I made a real point, and those teams continue doing so today, giving you starter stocks, which, in many cases, for Motley Fool Stock Advisor and Motley Fool Rule Breakers, those are the blue-chipy kinds of stocks that we think new members, new investors should get started with, the more reliable ones. When I think about reliable companies today, I’ll just give you three just off the top of my head that start with the letter A, how about Apple, Alphabet, and Amazon? Those three companies all have trillion-dollar-plus market caps, they all are well-known brands. While Alphabet isn’t as well-known with its A brand, but of course, Google, dominates most of Alphabet when we talk about revenues and income. So all three of those are great brands. They’re products that many of us services, that many of us use every day.

They have huge financial stability, big balance sheets with lots of cash. They have talented leaders with deep benches for succession of these management teams over time. While it’s certainly possible, as the only constant is change, that perhaps like IBM, some of these companies might lose some of their fire over time. If you’re just talking about starting a portfolio or building around a bedrock of blue chips, those three quickly come to mind. Now Motley Fool Stock Advisor is full of many others. But what I primarily wanted to do in closing was to remind us of what blue chips are and what they mean, update the phrase for 2022 in terms of the companies that I think qualify, and most of all say yes, blue chips are great investments for you and for me. They can populate your whole portfolio, if you like. You’re certainly right, Matt, that I do love Rule Breakers, but Rule Breakers and Rule Breaking doesn’t have a monopoly on growth. Of course, Apple, Amazon, and Alphabet, all three of those companies continue to grow really well while being blue chips. So I like blue chips that grow as opposed to blue chips that don’t grow, those are out there, too. So there you go one Fool’s opinion and thanks for writing in. Well, thank you for suffering this Fool gladly on our umpteenth Rule Breaker Investing mailbag. I’ll be back next week with our Mental Tips, Tricks, and Life Hacks. Always fun. It’s going to be Volume 7 to improve your investing, your business, and your life. Fool on.



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