The Motley Fool You Have More Than You Think: The Foolish Guide to Personal Finance [NOOK Book]

Overview

The Completely Revised and Expanded Edition of the New York Times Bestseller That Focuses on Personal Finance for Every Budget -- and Every Stage of Life
Taking control of your personal finances is the first -- and most important
-- step toward successful investing and a secure future. The Motley Fool You Have More Than You Think, now fully updated and expanded, provides ...
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The Motley Fool You Have More Than You Think: The Foolish Guide to Personal Finance

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Overview

The Completely Revised and Expanded Edition of the New York Times Bestseller That Focuses on Personal Finance for Every Budget -- and Every Stage of Life
Taking control of your personal finances is the first -- and most important
-- step toward successful investing and a secure future. The Motley Fool You Have More Than You Think, now fully updated and expanded, provides guidance for anyone trying to balance lifestyle aspirations and financial realities. The latest edition of this Motley Fool bestseller covers topics such as:
  • Getting out of debt...and into the stock market
  • Turning your bank account into a moneymaker
  • Using Fool.com and the Internet to learn about all things financial -- from buying a home to getting the best deal on a car
  • Saving enough to send your children to the colleges of their dreams
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Product Details

  • ISBN-13: 9780743216128
  • Publisher: Touchstone
  • Publication date: 1/2/2001
  • Sold by: SIMON & SCHUSTER
  • Format: eBook
  • Pages: 320
  • Sales rank: 719,780
  • File size: 3 MB

Meet the Author

Tom and David Gardner cofounded The Motley Fool, a multi-media financial education company, in 1993. Since then they have co-authored four New York Times bestsellers, including The Motley Fool Investment Guide and The Motley Fool's Rule Breakers, Rule Makers.

Tom and David Gardner cofounded The Motley Fool, a multi-media financial education company, in 1993. Since then they have co-authored four New York Times bestsellers, including The Motley Fool Investment Guide and The Motley Fool's Rule Breakers, Rule Makers.

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Read an Excerpt


Introduction
Our Fairy-Tale World

Once upon a time there was a prosperous country called the United States of America. America had fertile land, sunstruck coasts, purple mountains, and a happy people. She sported free public education, expensive but effective health care, and high-speed data networks anyone could tap into with a computer and a modem. In America more than any other place ever, you could do and say what you wanted, and your destiny was largely -- to an almost disturbing degree -- in your own hands. In fact, despite the protestations of whichever political party happened to be out of power at the time, America was the envy of the world.

But there was one thing that Americans lacked. Despite their comparatively rich status, Americans had very little understanding of what to do with their money. Most would just spend it, all of it -- and in many cases, even more than that. In fact, 70 percent of Americans carried around monthly debt on misunderstood little plastic devices called credit cards. Even those not seduced by these devices had a problem. Their instincts might have been right: Save the money and make it grow. But how to save it, how to make it grow, was something no one ever taught them.

It must have had something to do with their educational system. Their schools, particularly the best ones, focused on the liberal arts: languages, literature, history, philosophy, plus a little science and mathematics. But while some Americans were taught calculus before college, few were taught any of the elementary personal finance and investing terms that would make their lives so much easier after college. Easy-to-understand concepts -- price-to-earnings ratios, discount brokers, index funds, depreciation, balloon payments -- became instead terrifying (or terrifyingly boring) shadowy beasts whose names were to be spoken in whispers if they must be spoken at all. Pent up in their cages, the beasts remained forever inaccessible. It wasn't just the bars that kept these concepts caged -- there was no formal education of any kind about money!

But what was it that most United States citizens worked the better part of their adult lives to obtain? What would enable them to buy the house, the car...or to retire, or to put their children through school? The irony was inescapable: Due to an oversight of the educational system, one of the few truly universal, commonplace, and important subjects -- money -- became the stuff of an exclusive ruling class of "financial professionals."

And most of these "professionals" had for decades clothed the subject in expensive garments: overlong and extravagant words, weighty tones, an air of exclusivity. The implication was that only a Wise man could make sense of it all. But should that have been surprising? Most of the establishment made its money by managing that of others. That was the whole business. Thus, the less that the United States knew about its money, the greater the business for its car salesmen, banks, insurance salesmen, stockbrokers, and financial planners. Indeed, the establishment had little incentive to teach anyone anything at all! As history had occasionally and unfortunately demonstrated, the greatest money was made off the greatest ignorance. Future historians needed to look no further than the government itself for proof, as one state government after another sponsored daily lotteries preying on the widespread lack of financial understanding.

Capitalizing on ignorance was all the rage, short-term game that it was. And the game's top players would indeed have been long-term winners if it hadn't been for one tiny little plot twist we intentionally haven't yet mentioned -- the birth of online mass communication.

The birth of the Internet.

In July of 1993, from a small shack on the back of a nondescript residential property far removed from Wall Street, a little publication printed its first issue, bearing the improbable title The Motley Fool. Its goal was to educate, to amuse, and to enrich. Its name, alluding to Shakespeare's Fools, arose from the belief that truth often lay outside the bounds of conventional wisdom. The publication had its shtick, it had some decent ideas, and it had a terribly small audience...mainly family friends.

A year later, that same publication emerged from that same shack in newly hatched electronic form on America Online (AOL), and a small subversive movement had begun. Within a year, The Motley Fool became AOL's best-known site. At the close of 1995, Foolishness spread to an additional site, on the World Wide Web (Fool.com), whose audience and community of participants now number several million. We know the story so well because we were the guys who, way back when, were hacking away all night at our keyboards in that small shack.

But hey, what the heck was going on here?!

The answer was easy, but you had to know where to look. You had to look at medieval Europe, five centuries earlier.

At that time, it was another universal, commonplace, and important subject -- religion (here, Christianity) -- that had become an exclusive province. For centuries, a tiny but powerful elite clergy had been the exclusive interpreter of biblical stories and truths for the illiterate masses. And as is the case with our modern-day financial world, language then also served as a control. The medieval church wrote its documents and celebrated its Masses exclusively in Latin, a foreign language to most of its adherents, who spoke only their own local dialects.

That condition persisted until the development of the first great mass medium for publishing, in the 1430s: the Internet's truest technological ancestor, the printing press. Over the next century, Johannes Gutenberg's movable metal type ushered in a period of technological innovation, intellectual ferment, and social revolution of a type the world hadn't seen for more than a thousand years. Martin Luther translated the Bible into German; John Calvin and others did the same in French. Their efforts opened up new understanding and education for the populace, giving birth to what we today call the Reformation. The result? A new, open publishing standard diminished the church's power, following the democratization of its subject. The Bible found its way to the bedside table.

This should all be sounding very familiar, because the Internet is serving the same benign purpose today that the hand press did in the fifteenth century. (If the analogy interests you, flip to "Appendix I, Scribes? Meet Printers!", for some humorous further elaboration.) And don't expect any nice comments from the giants that the Internet is slaying, either! It's called revolution, dear reader. Let's fast-forward a few centuries and look a little deeper.

The French Revolution kicked off on July 14, 1789, when a Parisian mob stormed the now famous (and demolished) prison La Bastille. That day, a shocked King Louis XVI (who would lose his head three and a half years later) turned to his trusted Duke La Rochefoucauld-Liancourt and asked, "Is it a revolt?" The duke answered bluntly -- and quite accurately -- "No, sire, it is a revolution." Indeed it was, and is today as much as ever.

The world is changing rapidly, and as in the past, these changes favor you, the individual, not the entrenched establishment. That accords with the opinion of another Frenchman, the renowned student of America Alexis de Tocqueville, who asserted more than 150 years ago that America gets more democratic and egalitarian with every passing day.

So we are today perched at a crossroads between the Old World -- where average people were kept in the dark about their finances -- and a New World, in which we each now have the means to manage our money effectively. What's cleared the way toward this New World is a bulldozer of contributing factors that include greater distribution of educational materials, universality of corporate retirement plans, ubiquity of mutual funds, accessibility of investment information via the Internet, the popularity of investment clubs, the success of the discount brokerage industry, ongoing price reductions and improvements in personal finance software, and an increasing expectation among our younger generations that they'll receive nothing from (government-managed) Social Security. And about fifteen or twenty other reasons as well.

As Rabbi Hillel charged us, so we charge you with regard to managing your money: "If not now, when?" To which we add, if not us, who? In this un-Wise tome we'll have occasion to mention many people who'd like to manage or otherwise relieve you of your money. Unfortunately, in most cases they bring with them some basic conflicts of interest that put them at odds with your own greatest good. In fact, if you sometimes just stare long enough at the warm and fuzzy television ads put out by the financial services industry, you may begin to glimpse a huge gape-jawed monster lurking behind. "MONEY!" it roars, meaning yours.

Tocqueville was fond of pointing out that we Americans care a good deal about our money: "I know of no country, indeed, where the love of money has taken a stronger hold on the affections of men and where a profounder contempt is expressed for the theory of the permanent equality of property." So it's not just our voracious financial services industry that cares so much...it's all of us. OK, so if we do care so much about our money -- which is often made to sound wrong or bad, when it needn't be -- then it makes even more sense that we should be stewards of our own wealth.

Given the historical trends, the Internet's game-changing new rules, and the revolution that's occurring as we write, managing your own money is now easier and more rewarding than ever before. Indeed, we expect that the fairy-tale world depicted at the opening will increasingly look like most fairy tales -- drawing off images of an antiquated past. America is waking and will never be the same.

In the tradition of all Motley Fool scribblings, what you now hold in your hands provides practical, simply worded, and systematic advice for creating your own successful approach to saving, spending, and investing money. No preexisting financial knowledge necessary. (It might even be a detriment.)

$20 Million Patience

The prologue ended, the music subsiding, the crowd in its seats and now becoming hushed, we begin our show with one simple premise. As it is with your life, so too with your money: You have more than you think.

Every dollar that you've saved, every penny in the pig, has a potential value far greater than you think. You might live in a worn-out shanty a stone's throw from railroad tracks, with no more than $250 to your name, but we're telling you that those savings hold more possibility than you think.

And maybe you'd say you don't know anything about -- nor have any interest in -- your money. Maybe attending to your credit card, bank account, or broker seems simultaneously daunting and petty. All those calculations of percentage points, interest payments, and growth rates leave your heart feeling cold, your mind in a dizzy somersault, your soul empty. Most Americans feel the same way -- outmatched and thoroughly uninspired by the world of personal finance and investing. You'd be no different from the rest.

But even then, or particularly then, you have more than you think. For instance, you will derive far greater pleasure from understanding your finances than you might currently imagine. Take a second to ponder on something you really love in this world. Surfing? Mystery books? Ping-Pong? French wine? Long-distance running? The disciplines in each of these actually mimic those of basic money management. The joy associated with one can naturally transfer over to the other.

In the few hundred pages you have before you, we offer plain language, a smattering of basic mathematics, a few dozen gags, and the occasional random burst of common sense. These things compose the palette and brush we'll use to illustrate that you can succeed in achieving true wealth whether you're starting out today with $57 in your savings account, $500,000 in your brokerage account, or $77,200 in mortgage debt. True wealth isn't just about money, of course, though your money will be expanding, secure, supportive of your ideals, and probably more than you need. True wealth comprises also family happiness, cultural enrichment, the satisfaction of a job well done, and copious extra time to pursue your hobbies and interests. We'd be fools (small f) to promise you all these things here. But what we can state emphatically is that a secure financial situation makes each of these far easier to come by. And we do promise that this book will transform the toilsome, tormenting task of mastering your money into good, clean, energizing fun.

In fact, if by the end of The Motley Fool You Have More Than You Think you find that this is not the case -- that we've bored you or confused you, or just generally let you down -- we'll fall back on our standard Foolish recommendation, which is to encourage you to sue our multibillion-dollar litigating powerhouse of a publisher.

As mastery is our end, let us begin by studying the best. If you'd like to be the best softball hitter in your neighborhood, watch how Ted Williams swatted at a pitched baseball. If you want to be a filmmaker, Hitchcock's numerous classics await you at the corner store -- why not start there? Today's great pianists grew up playing Chopin, Mozart, Brahms, and Beethoven for years. Fools that we are, we propose that this is the exact approach to take with your money.

In our search for a model, we stumbled upon a rather unlikely character. Our Chopin of finance wasn't a full-service broker, wasn't a big-name money manager on Wall Street, wasn't a self-proclaimed financial expert inking columns in the daily paper. She wasn't a man, either. And she was uncelebrated -- no magazine covers, certainly, and in fact not even a single appearance on any of today's superabundant financial shows on cable TV. She was nobody, really. She was just an individual investor. In a financial world where Wisdom and celebrity are so closely associated, she was just a darn Fool. The notion that she, quietly investing on her own, might be the most expert would undermine all that America believes to be true about money. Here too, Pythagoras was right: To find truths, we must invert.

So, who is she?

Ladies, gentlemen, and Fools, meet Anne Scheiber, a New Yorker whose initial $5,000 investment in common stocks in 1944 steadily grew into $22 million by the time of her death in 1995. The only reason we ever heard of her is that in her estate she deeded all of her money to Yeshiva University in New York, creating a splash media event at her death. As the story unraveled, investors at The Motley Fool online tried to figure just how she could have ended life with a treasure chest befitting royalty. The answer lay in simple thinking and the power of compounded numbers.

Anne Scheiber's investment portfolio grew at an annual rate of 18.3 percent. Some years, she lost a bundle -- between 1972 and 1974, her portfolio lost nearly half its value. In other years, she nearly doubled her money. But, all told, her money grew at that average yearly rate of 18.3 percent. Let's artificially apply a steady rate of 18.3 percent annual growth to her $5,000 investment, just to see what it looks like after one, ten, thirty, and fifty years:

$5,000 Portfolio Growing at 18.3 Percent per Year
Initial Investment

$5,000

After 1 Year

$5,915

After 10 Years

$26,842

After 30 Years

$773,593

After 50 Years

$22.3 million

The inquisitive reader may be wondering just what it took to grow Ms. Scheiber's money at that swift annual rate of 18.3 percent. Was she mixing in some casino betting? Did she take Trump-like risks, borrowing unthinkable sums of money? Was she seen down at the dog tracks on Wednesday evenings with large bills and a bagged jar of whiskey? Did she rely heavily on expensive advice from the marbled mansions in Manhattan's downtown?

Not exactly.

Ms. Scheiber did not play her money in real estate, bonds, options, gold coins, derivatives, or ostrich farms. She wasn't a gambler. And she never bought a single mutual fund. Though she had an account with a full-service broker, she eschewed that industry's accustomed approach to investing, which involves frequent trading using up-to-the-second information. If Anne Scheiber were writing this introduction, she'd be leaning over our keyboard right now typing in that her profits were achieved in an unremarkable fashion, by a method that anyone in America -- regardless of gender or race or all those other largely artificial distinctions that the media is always foisting upon us -- could have used to turn $5,000 into $22 million.

How did she do it?

She invested her long-term savings in the stock market -- an arena that many Americans considered highly speculative at the time, just as they do now. Scheiber used that money to become part owner in a handful of well-known businesses. She recognized that millions of people drink Coca-Cola and Pepsi every day, that millions treat themselves with medicine from Schering-Plough and Pfizer, that millions drive Chrysler automobiles. And so, after some basic financial analysis, she bought some stock in each of these and held on for decades.

We don't want to oversimplify here. Holding on to the same stocks for decades isn't something of which we're all instinctively capable. It took patience above all, particularly during bad market years. Hand in hand with that patience was the resolve to ignore the sometimes loud and panicky headlines splashed across the covers of our nation's glossy news and financial magazines. And not everyone is born with Ms. Scheiber's awareness that active trading in and out of different investments leads to three things, all bad for the average investor: (1) anxiety, (2) high commissions for the brokerage firm, and (3) stiff yearly capital gains taxes. We're not saying everyone can be Anne Scheiber, but it seems a good deal easier and more enjoyable to take her road to riches than most of the others we've come across. Anne Scheiber inverted the conventional Wisdom to find the truth.

It is this conventional Wisdom that we'll be assailing throughout these pages. After all, common thinking says you'd need huge sums of capital to buy stocks, that the stock market is big and indecipherable, and that you shouldn't invest without the expensive assistance of a professional. Applesauce! That nonsense comes from the industry itself, which makes money off of your ignorance. Theirs is a philosophy of material convenience; they make a lot of money when you can't do it yourself.

As new as our roll-up-your-sleeves-and-do-it-yourself mantra may sound, it's as old as the public markets. Many of history's great investors and financiers -- Rothschild, Getty, and Buffett among them -- have held that common Fools with a bit of discipline and persistence can turn paper into platinum. Those ideas were effectively iterated once again recently by an unlikely source -- one of our nation's great mutual fund managers, a darling on Wall Street, Peter Lynch. Lynch spent his career among the Wise as he managed Fidelity's largest fund, Magellan. From 1977 to 1990, he sweetened the lives of his investors by earning them annual returns of over 29 percent. A $10,000 investment in Magellan grew to $274,000 during his thirteen-year tenure. One might expect Mr. Lynch, upon retirement, to have toured the country in regal attire, championing "professional" money management. After all, he must have used unusually sophisticated strategies and exposed his investors to substantial risk in the process, right?

Nope. Like Anne Scheiber's, Lynch's approach is straightforward and accessible. And rather than pumping up Wall Street and the mutual fund industry, upon retirement he sat down and wrote a number of investment books that, more than any before, promote the idea that "amateur" investors can best manage their own money. To support this highly un-Wise position, Lynch tells the story of a group of seventh-graders at St. Agnes School in Boston who, by using nothing more than horse sense, consistently outperformed 95 percent of our nation's richly rewarded fund managers and financial advisors.

Kids were beating up all over the starched shirts.

Given what we've already written, you probably won't be surprised by their method. They bought companies like the Gap, Disney, Nike, Tootsie Roll, Pepsi, Topps, and NYNEX. They looked for household names with strong future prospects. Finding these companies took little more than focusing on excellence among strong long-term consumer businesses, an approach we'll teach in this book. Importantly, their approach avoided the greatest mistake that most people make with their investing, which is buying stuff they don't understand. The seventh-graders started small, bought what they knew, and did it all themselves.

So here you have it. Five thousand dollars standing pat for fifty years on its way to becoming $22 million. Seventh-graders trampling Wall Street. And in the face of it, a financial services industry whose expensive marketing and overpriced advisors are hell-bent on saying it can't be done. Given this milieu, you just know it's time for some multicolored caps to tumble across the stage. It was the Fool in Elizabethan theater who played to the people while speaking simple truths to the king and queen. Hundreds of years later, Folly is alive and well, and the truths to be told in today's financial world are that

  • You can do much better managing your own money than giving it over to someone else
  • You can quickly and painlessly learn how to save thousands of dollars on a house, a car and other major purchases
  • Planning and executing your financial decisions needn't take more than a few hours each month
  • You will actually enjoy this work, if it's framed Foolishly
  • The only math you'll need is straight out of your fifth-grade textbook
  • Being rational about these matters is both crucial and fun

Unfortunately, this simple message of regular savings, sensible spending, and self-directed investment in stocks hasn't yet reached everyone. We live in a nation where approximately 70 percent of the individual ownership of public companies remains in the hands of 10 percent of the people. This is not because only rich people can buy stocks: it simply speaks to a broad lack of education about finances.

Unfortunately, too, even when people have started investing, of late they've been socking their futures away into mutual funds. Americans have poured over $4 trillion into stock funds, in most cases not realizing that these funds have consistently underperformed the market. Of course, this is better than dropping it on the greyhound in lane six. But over the past five years more than 80 percent of stock mutual funds have underperformed the stock market's average return. With these and other missteps, the gap between the haves and the have-nots is widening; it's as much the result of poor math skills as anything. Later in this book, we'll present an extreme and show how, over time, the investor who starts with just $500 in common stock will demolish the wealthy lottery player or casino bettor starting with $15 million. This Fool will also outrun the steady investor with a good deal of money in underperforming mutual funds.

In simple mathematics lies your financial success. That Foolish truth was never more important than it is today. The mathematical misreads that damage so many savings accounts in America are now beginning to create nearly insurmountable problems. As of this writing, consumer debt tips the scales at $550 billion. The average household in the United States that carries a credit card balance has more than $7,000 worth of credit card debt. And recently, scarily, over half of those surveyed in a poll on success chose the state lottery as the only way to get ahead financially. Imagine that. Financial dependency and numerical ignorance are sharing the same bed, and the child born of that unfortunate coupling is not going to win any beauty contests. One need look no further than the nearly $3.7 billion spent on lottery tickets in the state of New York in 1998 and 1999 to see as much.

Much of our ongoing work involves a concerted effort to terminate this cozy relationship between bad math and financial servitude. (When we use "we" in this regard, we're referring inclusively to ourselves and our entire Foolish troupe -- of which you are now a part, so take up the belled cap with us!) Probably our single best weapon is the spread of ideas made possible by the Internet. The digital network, which enables a simultaneous, mass conversation around the globe, is radically redefining how we gather and process information. Your schools, libraries, and business competitors have already made the Internet core to their undertakings, so if you somehow haven't already, it's high time you did too.

The new public dialogue about finance and investing will continue to force changes in the way entire industries operate. For instance, beyond Wall Street, the networked world forces car and insurance salesmen to alter their traditional approaches to the consumer. They don't so easily run a dozen fast-talking salesmen at you with rotating deals, long contracts, and unnecessary charges. They can't expect that, before signing on the dotted line, you won't sign in to Fool.com and ask thousands of people what they think of whole life insurance, car warranties, leasing deals, and the like. They will have to expect the opposite, since from now on you needn't make a single important financial decision in isolation.

And this move to mass conversation is also rewriting what Wall Street is. Over the next decade, the compensation system in the financial world is going to be almost completely scrapped and rebuilt to support its customers' interests. Electronic transactions are bringing costs down throughout the industry, and the Internet is spreading the word about better service and better prices. While the average commission for a trade executed by a full-service broker still hovers around $150, the average trade through a discount broker runs about $15. And there are numerous accounts which now allow you to execute trades for free. How long will these inequities last? Even less time than you'd probably think, given the existence of the Internet. Likewise, actively managed mutual funds charging 1.50 percent management fees are now having to compete with electronically managed index funds charging 0.18 percent management fees. For a $50,000 account, that's a difference of $660 per year. And the index fund is beating more than 80 percent of those higher-priced managed funds! Did someone just nail a coffin shut? Is that a death knell we hear playing?

Everywhere in the money world, plus is becoming minus, theirs is becoming yours, and the folly of Wisdom is giving way to the wisdom of Folly.

It is in this environment that The Motley Fool You Have More Than You Think has found its way to your fingertips. The main reason you need this book is to learn the useful personal finance information that will help you spend less, save more, turn your own profits, and teach and encourage others to do the same -- and to share in a couple of good laughs. If you help us revolutionize the financial world along the way, even better.

We at Fool Global Headquarters are fully aware that the enjoyment one gets from buying a car or speaking with a financial advisor ranks right up there with the pleasurable act of sticking one's hand in a blender set on puree. If you're like most people, you just want to get it all over with, praying that you got an OK deal. So you stumble through life half valuing the car, the house, the term life insurance, the stockbroker, and half rushing to get to the end of the process. This hurriedness and mass disenchantment with personal finance creates a financial services industry that benefits lucratively from a titanic amount of societal ignorance. In their ideal world you fall asleep over the contract, they shake you awake, and you sign the document.

This disenchantment stems largely from a collective belief that financial decisions all just seem too big and complicated. But the people who succeed at investing have never thought of it as a big "financial" thing, disconnected from the rest of their lives, but rather as a series of simple purchase decisions, much like price shopping at the grocery store. Yes, we'll soon take a death-defying ride through the analysis of everything from slot machines and the state lottery to credit cards, insurance plans, mutual funds, the stock market, and much, much more. But the simple and numerical truths will become evident, and the "numerical" tasks will never get more difficult than the addition, subtraction, multiplication, and division chalked on your grade-school blackboard. Maybe we should have titled this book Easy Numbers, Easy Money -- it would probably have sold more copies.

As we prepare to begin, we should probably let you know up front what this book will not do. That way, no hard feelings, no questions asked, no sense of having been misled. If you're browsing at Borders or Barnes & Noble, read this section right now to figure out whether or not to place this book back on the shelf. (With the cover facing out, please, and, in fact, if you could just adjust the bookshelf so that our other books also have their covers facing out, that would be great.)

Although we'll concentrate on personal savings early in the book, do not expect us to dawdle too long on how to live frugally, perhaps saving $10 by not sending birthday cards this year. Even if you live to the ripe old age of ninety-five, life's too short to trade away happiness for halfpennies. Though the Fool.com Web site has a dedicated circle of "Living Below Your Means" enthusiasts, The Motley Fool You Have More Than You Think will not teach you how to budget out the joys of being.

When we begin concentrating on investing, we will not show you how to trade stocks for a living. Further, we'll neither teach you all the latest Wall Street jargon nor put you down into the pits with Manhattan's energetic commissioned traders. If you are disappointed by this, let us know with a letter or e-mail, and if we get enough of such messages (say, 1 to 2 million), we'll consider following up this book with the sequel We're Wise Now: The New Foolish Tune Plucked from Our Market Research.

Next, on a more serious note, this book will not spend much time teaching advanced stock-research techniques. We've done some of that in the second and third books of our Motley trilogy, The Motley Fool Investment Guide and The Motley Fool's Rule Breakers, Rule Makers, and offer additional help in that direction in The Motley Fool Investment Workbook. Further, our online site, Fool.com (available also at America Online at keyword: FOOL), has additional fresh information pumping out twenty-four hours a day, making it a veritable treasure trove for active students of investing. The amount of information moving through our online areas each day is currently the equivalent of seventy-five full-length books, give or take a score.

Like any Fool book, this one is written for everyone -- to inform the novice and to amuse the sophisticate. If you're a serious investor, we hope you'll find numerous investment suggestions, ideas, and pointers throughout this un-Wise tome, and you might also be interested in The Motley Fool Investment Guide or The Motley Fool's Rule Breakers, Rule Makers.

Finally, because we lack expertise in these, as well as the necessary space to go after them, this work will also fail to teach the basic sailing knots, how to make candles, where to fish for pike or perch, or anything about Zulu war tactics. Each would open up new worlds, but each is a subject that -- without exception -- we know very little about. Que será, será.

To close, simple thinking and public conversation about money today are discharging lightning bolts of new knowledge and understanding across the country, scorching conventional wisdom in all its forms. In belled caps and colored slippers, Fools are actually getting paid (through improved investment returns) to peek in on the downfall of unnecessary kings.

The message swirling around our corner of cyberspace today is that money management ain't as hard as these kings have it cracked up to be. Starting with very little, Warren Buffett has in his lifetime created $28 billion of wealth. With characteristic humility -- but even, we think, with some accuracy -- Buffett recently called his achievement "remarkably unremarkable." Peter Lynch beat everyone on Wall Street, then wrote two books about how overrated the fund manager, the stockbroker, and the financial advisor are. And starting with little money and lots of patience, Anne Scheiber accumulated more wealth on her own than most of us could ever need.

Lest you think that not everyone can make that sort of money, please understand, dear Fool, what is happening over at Yahoo! these days. According to Matt Richey, the Fool's director of investment strategies, on the day this sentence was inked, Yahoo!'s stock rose $4 per share, earning its cofounder and chief yahoo Jerry Yang $181.5 million in profit in a single day. Mr. Yang is human. This is a guy who has a clause in his contract that permits him to work barefoot. What you'll find if you look closely is that his achievements are far more mathematical than magical, more natural than preternatural. And best news of all for you and us is that the stock market has made it possible for a whole bunch of other people to own his stock, earning the very same returns, if not in quite the same amounts. This is part of the miracle of America, though a very pedestrian sort of miracle it is. It's high time you understood and shared in it, if you haven't already.

Before shutting down our little introduction, permit us to say once again that this book is for people who don't read financial books. Financial books are terribly dull and use complicated language. What you have here in your hands is a naughty little time-saver written by English majors, laced with jokes about the establishment for no reason other than that the establishment has proven so unwilling to make any jokes about -- or explain -- itself!

Copyright © 1998, 2001 by The Motley Fool, Inc.

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Table of Contents

Contents
INTRODUCTION
Our Fairy-Tale World
$20 Million Patience

Part I
YOU HAVE MORE THAN YOU THINK

You Have More Than You Think
And a Bunch of People Want What You Have
Surprise Them -- Save It Instead
You Can Get and Keep More Than You Think
The Ten Most Common Financial Mistakes

Part II
INTERLUDE

Make Your Dog a Trick Dog

Part III
AN INTRODUCTION TO INVESTING

But Profit Off the Savings
Your First Investments
When Not to Invest
A Stock Primer
The First Federal Bank of Coca-Cola
Obviously Great Investments
Opening an Account

Part IV
AN INVESTING LIFE

Buy What You Are
Where Do I Fit?
Become a Partner
Getting Help Online
The Ten Most Common Investing Mistakes

Part V
BEYOND

Your First Few Months Investing
The Fourteen Things You've Learned Here
Quality of Life

Appendix I: Scribes? Meet Printers!
Appendix II: Books You Should Like
Appendix III: Open Letter to the White House
Glossary
Acknowledgments
Index
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