You Have More Than You Think: The Motley Fool Guide to Investing What You Have

You Have More Than You Think: The Motley Fool Guide to Investing What You Have

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by David Gardner, Tom Gardener, Tom Gardner
     
 

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"It's one thing for a small child in an ancient village to declare that the emperor has no clothes. It's another for articulate 'Fools,' as they like to call themselves, to shout it from the top of the Internet and from their bestselling book. It almost makes you wonder how long Wall Street will survive."--Chicago Tribune

"Cool. Actually, quite hip...The

Overview

"It's one thing for a small child in an ancient village to declare that the emperor has no clothes. It's another for articulate 'Fools,' as they like to call themselves, to shout it from the top of the Internet and from their bestselling book. It almost makes you wonder how long Wall Street will survive."--Chicago Tribune

"Cool. Actually, quite hip...The Gardners set out to do something different in the investment world: have some fun while making a wad of money...[and] they seem to have succeeded."--Wired

"The Fool is funny and flip, while containing solid information and advice for individual investors."--The Washington Post

"Humorous and savvy."--Walter Mossberg, The Wall Street Journal

"The Motley Fool is special...In just a few months the Fools have built a dedicated following with their irreverent and savvy style, and their portfolio has consistently outperformed Standard & Poor's."--The Detroit News

"Best place to ask a stupid question? David and Tom Gardner are the Tappit brothers of investing. The Motley fool is one of the 99 Best Hangouts Online." --ComputerLife

"Followers of The Motley Fool...can learn much about investing and maybe more about disrespecting authority."--The Cincinnati Enquirer

Editorial Reviews

Library Journal
This sequel to the wildly popular The Motley Fool Investment Guide (S. & S., 1996) updates some of its previous information while offering a practical and humorous route to investing. (The original book continued to remain on best sellers lists through most of 1998.)
U.S. News and World Report
It aims right at generation X, the young adults who, according to one poll, are more likely to believe in UFOs than in the solvency of the Social Security system. This book, which is scheduled to come out early next month, focuses on the virtues of starting to invest early and finding ways to save instead of spend. Brothers Tom and David Gardner, the Motley Fools, explain the complexities of stock-market investing with the same mix of erudite cheekiness and didactic zeal that they have displayed for years on America Online and at their Internet site.

Product Details

ISBN-13:
9780684848129
Publisher:
Touchstone
Publication date:
12/01/1998
Series:
Motley Fool Books Series
Pages:
304
Product dimensions:
5.50(w) x 8.46(h) x 0.77(d)

Read an Excerpt

From Chapter One: You Have More Than You Think


Brain

The revelation of thought takes men out of servitude into freedom.
-- Emerson


We have no intention of insulting anyone by leading off this chapter with a section simply titled "Brain." Let's face it...we pretty much all know we have brains, and while we could always be smarter, few of us feel too cerebrally gypped.

That said, many people seem quite willing to dismiss the exercise of reason when confronted with situations that smack in any way of the financial. Take the huge popularity of credit card debt, for instance. Like horses wearing blinders, a whole generation of Americans has grown up focused only on meeting that "minimum monthly payment" line, failing to recognize the implications of paying annual interest rates in excess of 15 percent. Observations like that inspire us to lead off this crucial chapter by stating unapologetically that you have more than you think: You have a brain.

"All men by nature desire knowledge," wrote Aristotle, but many have disavowed their nature when it comes to finance because no one ever taught them anything about the stock market, or explained how a retirement plan works. Once we are freed from classrooms and textbooks, the subject becomes completely off-putting, as are many of the other subjects we didn't study in school, like quantum physics or Babylonian history. But finance isn't at all like quarks or ancient kings. You deal with it every day. Really now, how often do you handle money and spend it, and how many people spend how many hours dreaming about it? If we can understand our dreams, wfor dumb.

You have a brain. But most people think they don't when it comes to anything financial. Additional examples abound. Do you have friends with money in the stock market? Or in a mutual fund? Ask them to explain exactly what they're invested in. Chances are very good that they'll be able to tell you little more than the name of the company or the fund. This is the direct result of someone else having sold them investments that they know nothing about. Most people with savings have their money in mutual funds but don't really know what they are or how they work. Some Americans own stocks without recognizing that stocks simply represent their part ownership in a given company. And how many people own shares of oil-and-gas, gold-mining, or high-technology companies without really having the faintest idea how those businesses work or what the companies' products are? Come on, now you're better than this, and you have more than you may think.

In his delightful book One Up on Wall Street, Peter Lynch points out the irony that most of us Americans spend a great deal more time and care making consumer electronics purchases (like refrigerators) than we do on our investments. The irony couldn't be stronger: Consumer electronics cost hundreds of dollars and lose value over time, lose value the very minute you walk out of the store. For some reason, however, we'll roll up our sleeves, check prices, read and compare the long lists of features, do a bit of "test-driving," and haggle with the salesman.

By contrast, our investments often involve thousands of dollars and will appreciate in value over time! But we've made up our minds that investments are complicated or boring, or really just "gambling" at heart, so we just don't think much about them.

What do we do, then? We employ a financial services company to manage them for us, be that a brokerage firm, mutual fund, financial planner, whatever. Amazingly, once again we fail to ask our financial professional the simple and revealing question "How do you make money?" A follow-up, which should always be asked, is simply "How do you make more money than that?" If you walk away with nothing else from these Foolish pages, walk away with a simple understanding that

  • Brokers earn commissions for each trade made on your account -- and they make more money by trading your account in and out of more investments
  • Mutual funds take a portion of the money you give them to manage -- and they make more money by attracting as many other people's money as possible
  • Financial newsletters make money through subscription fees -- and they make more money by enticing larger numbers of subscribers
"Nothing astonishes men more than common sense and plain dealing," wrote Ralph Waldo Emerson. Astonish yourself by applying some of this common sense and you'll find that each of the ways that the entities listed above make more money is ultimately detrimental to their customers' interests. (Please note that your name tag reads CUSTOMER.)

Brokers make money when they move you in and out of different investments -- even very good ones. They get an additional lick off your ice cream cone every time. Each of these moves also adds to your annual tax burden. Further, this frenetic activity tends conveniently to suggest to many customers that "Geez, only my bro ker can keep up with this stuff I just can't do this on my own." Au contraire!

Mutual funds spend additional monies (your money) advertising themselves so they can attract more money to manage. Plus, every additional customer they bring to their beachfront makes it that much less enjoyable for existing customers who have already laid out the towels and put on the tanning lotion. To put that in financial terms, the bigger the fund gets, the more dollars it has to spread around; the more dollars in play, the less nimble it becomes; the clumsier it is, the less likely it is to outperform the stock market.

Finally, financial newsletters end up having to show you pumped-up numbers to attract subscriptions. Some of them obtain such numbers through creative accounting, possessing more gadgets in their bag of tricks than you'd find in a Swiss toy maker's shop. A host of bestselling financial newsletters and books are marketed on the basis of illusory or impossible-to-achieve big-sounding returns.

The easiest way to understand things is to ask very simple questions about them. Unfortunately, many of us are afraid to ask basic questions because we think it may make us look stupid. Actually, you look stupid only when you hide your lack of understanding behind a presumed knowledge. To return to the theme: We have more than we think. We can bring the power of reason to bear on this subject. Reason's most basic tool is just asking questions. And asking questions is the very thing that many financial professionals today do not want you to do.

Don't cooperate. Wait for your answers.

Copyright © 1998 by The Motley Fool, Inc.

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You Have More Than You Think: The Motley Fool Guide to Investing What You Have 5 out of 5 based on 0 ratings. 1 reviews.
Daryl_Hajek More than 1 year ago
This is an *EXCELLENT* book and I can never recommend it more highly than I already have.  This is an ABSOLUTE MUST-READ.  It's a rotten shame that schools don't teach what this book teaches.  I'm eternally grateful to David & Tom Gardner.