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Tariffs, market drops, market rises. Where to find happiness? Optimism?
Some recent stocks I like. It's a motley episode, and maybe that's because, well, you drove it. Your notes to our email address, rbiatfool.com. Your tweets to our Twitter X account, at RBI Podcast. At the end of every month, we pop open both of those things, rbiatfool.com and at RBI Podcast, and we see what's on your mind, and I respond.
Doing my best out here. It's the Rule Breaker Investing Mailbag. This is the 114th consecutive monthly mailbag in our podcast's history. And yeah, just like all the others, it's driven by you. Thanks. Let's talk. Only on this week's Rule Breaker Investing. It's the Rule Breaker Investing Podcast with Motley Fool co-founder David Gardner.
All right, let's look over the month that was. I opened up April with Essays from Yesterday, Volume 7, where I randomized from past writings and forced myself to read what I wrote, whether it was five years ago or 15 years ago, and comment on it. Always fun. And then, my friend, I hope yours too, Paul Rice, founder of Fairtrade USA, joined me talking about his book Every Purchase Matters on April 9th.
April 16th, ChatGPT Asks and David Answers, Volume 3. I had a lot of fun with the softball, the hardball, the curveball, the screwball, and the knuckleball that ChatGPT threw me about Rule Breaker investing in the middle of this month. Hope you enjoyed that, too. And then speaking of sports, breaking the rules of sports with my friend, Kimball Crosley, last week as we questioned openly some of the ways that we think the media and the
the public at large misapprehend what's happening out there on the field. Is there really momentum? Is that really a factor that drives the next shot or swing?
or not. Well, I hope you enjoyed it, especially if you're a sports fan, Kimball and me last week. And by the way, a weekend extra continuing a sports theme for April, 2025, our conversation with now deceased, but larger than life prize fighter, George Foreman, my brother, Tom and I from years ago, Rick Engdahl. And I cooked that up along with our pal, Matt Greer as your weekend extra. It was fun to go back to that 10 minute interview with big George.
All right, I'm looking ahead. I see seven mailbag items this month. But before we get started, as I shared at the start of this year, my 2025 book, Rule Breaker Investing, is available for pre-order now. After 30 years of stock picking, this is my magnum opus. It's a lifetime of lessons distilled into one definitive guide, my final stock market book.
Each week until the book launches on September 16th, I'm sharing a random excerpt. We break it open to a random page. I read a few sentences, so let's do it. Here's this week's Page Breaker preview. A few sentences from midway through part three, the final part of the book, and I quote,
As an entrepreneur, my biggest holding is ownership in the business I helped found. It's both a luxury and a curse that so many other small business people can appreciate. Your own business is very likely the greatest source of your wealth. That fact alone has allowed me to take more risk in my equities portfolio than I would have otherwise.
otherwise. End quote. That's this week's Page Breaker preview. To pre-order my final word on stock picking, shaped by three decades of market-crushing success, just type Rule Breaker Investing into Amazon.com, Barnes & Noble.com, or wherever you shop for great books. You know, when you think about it, a great investment book literally pays for itself. And then some, thanks to everyone who has already pre-ordered.
All right, seven Rule Breaker mailbag items. I do want to mention just up front one that isn't technically a mailbag item, but I want to thank longtime Fool listener and Motley Fool member Rich Smith. Rich, you sent a wonderful picture of your family visiting Alexandria, Virginia. There you were with your lovely wife and two kids posing in front of 2000 Duke Street, where the Motley Fool continues to be based. It's just that these days, as more of a remote-first
virtual company, the way we're organized at present. We don't have much presence at 2000 Duke Street anymore. We do sometimes do podcasts from there and other monthly Fool gatherings. But Rich, what a delight. Thank you for your pilgrimage to our longtime Motley Fool headquarters. It was a delight to see you and your family.
All right, Rule Breaker mailbag item number one, writing in from Germany. Always great to hear from you, Andreas Hamm. Andreas, you wrote, Hey, David, I listened to your episode with Paul Rice, and I appreciated the whole notion of what you buy has an impact on someone. In Europe, there's a company called Crowdfarming, which connects mostly European farmers directly to consumers. You'll find a lot of labels as different criteria for organic farming exist, but
Two labels have become a strong indicator, Andreas writes, for my buying decision, regenerative agriculture or conversion to regenerative agriculture. Those farmers really want to go the extra mile and hence deserve my money as nearly every aspect of farming is tracked. They're also getting audited and a report on the progress is established for every regenerative farm there's.
year after year. That's transparency you don't get for any other label for agricultural products as a consumer.
Andreas continues, I have one disagreement about the episode is I don't trust most labels. A lot of the alliances initiated by the private sector are not following through with a proper audit process. Failing the audit as producers means losing money, and therefore the criteria have to be met on the day of the audit while getting ignored for the rest of the non-audited period. There is no reporting that I as a consumer can look into either.
either. As an example of lacking trust, let's use the FSC label, which was mentioned somewhat positively in the episode as well. I'll pause it right there for a sec. Andreas is referring to the Forest Stewardship Council label. And what he's about to say, I simply can't endorse. I don't know enough about this myself. So I'm just sharing your viewpoint, Andreas, for fools everywhere. You go on to say,
You and Paul should take a closer look at this label of your beloved paper products and tell me which of these products don't have an FSC mix label. I assume it's close to zero, just like the amount of FSC-controlled wood in the FSC mix certified paper product.
We're getting a little bit down in the weeds here, possibly only speaking to people who really understand this, but let's keep going a little bit further, Andreas. You go on to say investigative journalists discovered that FSC-controlled wood is often mixed with illegally cut wood, and nobody can verify the whole sourcing process. No auditor is going to ride on wood logs along the Amazon River, although that would make the audit process more exciting. Hence, there's no guarantee that FSC-controlled wood
is properly controlled and therefore the label, Andreas asserts, becomes useless. What I would encourage listeners to do is voting for a better future with your wallet. If your money goes to smaller, more ethical and social businesses, you have no money left for the bigger corporations that don't provide positive outcomes to producing communities around the globe. Once the alternative becomes more viable for producers, as seen with Crowd Farming's expanding network,
of farmers, the business models of big corporations might also shift to avoid losing their producers or to rephrase your, referring to my, David's remarkable, quote, make your grocery shopping reflect your best vision for our future. Fool on.
Andreas. Well, first of all, Andreas, thank you for writing in. I'm so glad you enjoyed the episode. I did too. Paul's book, Every Purchase Matters, I mean, a lot of good books. It's right there in the title. And as I went on to say, Every Purchase Matters, even if you and I are not that well informed as consumers and
let's all try to be at least a little bit better informed. Not everybody has the same drive or time or interest in this, but I think any extra effort there is typically worth it, something that I would vote for. But even if you don't care, the reality is that every one of our purchases still matters because whoever's receiving our money on the other end is getting benefited. And anybody who didn't,
A competitor is not being benefited. So there's no question in capitalism, every purchase matters. I think Paul Rice would certainly agree with a lot of what you're asserting. I can't speak to FSC, Andreas, but yeah, let's celebrate true transparency and let's insist on rigor. I think those things are things I'll vote for all day long. So that trap of audit and ignore labels is
I'm sure that does happen in industry, big and small sometimes. I would encourage every Fool listener who has the time and interest definitely to dig into the audit frequency. And you know, it doesn't take every one of us to do so. It just takes some investigative journalists or some other fellow Fools to report on these things, to look into them and report. And transparency will out. And I think the truth does too over time. There's no question in my mind, there's a lot better organic farming happening today at scale than
than probably ever before. And even big corporations, I might subliminally
single out Whole Foods, have been instrumental in enabling that. I don't view big business as bad and little business as good. I realize some people will view things that way. I'm not saying that's your view, Andreas, but I think that, yeah, transparency and rigor in audits are great. And I will close by saying the power of voting with your wallet will always be powerful. Each of us in the grander scheme has but a small part to play, but everything
but every one of us does have a part to play. And yeah, I love mission-driven companies, purpose-driven producers. There are U.S. analogs to these things. When you think about community-supported agriculture, we have direct-to-consumer meat and honey co-ops in this country. We have local regenerative farms. I know you do too in Europe and around the world. So these are places that, especially for listeners for whom these terms are new, these are good places to start. Every dollar spent on a regenerative product
is basically a dollar withheld from polluting incumbents. So that collective demand does drive corporate change, Andreas, and does drive global change. Thank you for writing it.
All right, on to Rule Breaker Mailbag item number two. You know, I got two similar sentiments. I'm going to combine them into a single mailbag. The first from at Paul underscore Essen on Twitter. Paul, you said, not sure if it would make for good podcasting, but I find myself increasingly having trouble balancing the clear logical advantage of saving early and often with the emotional need of enjoying life now because you can't take it with you.
Paul goes on any mental models you find helpful. And also, I received a lovely tweet from at Gordon's Gecko on Twitter X as well. A similar sentiment at Gordon's Gecko. You wrote in an ever increasingly overstimulated world. How do you, David, try to simplify and lead a more interesting life?
So, both of these questions I take to be ultimately about happiness and how we might define it, how we might achieve it, how we might keep it going, get more of it. And whenever I think about happiness, the first person I think about is Shirzad Shamim, past guest on this podcast multiple times. And you know, it's been a year or two. I think I want to have Shirzad back again to speak to a few of these things. But his book, Positive Intelligence, is one of those books
where I feel like every human being would be better off for having read Positive Intelligence. So first of all, if you're hearing that title for the first time this week, dear listener, please know I highly recommend you take a look at Shirzad's work, Positive Intelligence.
And I'm especially reminded of one of those mini sermonettes that Shirzad rocks. He may have rocked it on this podcast before, but I was going back and checking a few other digital assets I've kept up with. And so I'm largely quoting him. I'm going to share that over the next 90 seconds or so. I'm just channeling how Shirzad thinks about happiness. And it's entitled, You'll Be Happy When.
Shirzad says in so many words, your current situation and circumstances are not good enough for you to be happy. Am I right? You'll be happy when fill in the blank. He'd go on when you finally grow up and become independent from your parents, when you get into that college, when you graduate, when you get that job, when you get that promotion.
When you buy that house, when you find that relationship, when you have that child, you'll be happy when, and so on. He goes on, now think about it. When you finally got what you thought would make you forever happy, how long did your happiness last before something inside you again said, actually, you don't have what you need to be happy. You'll be happy when...
And you create a new target for when you'll finally be happy one day. Shirzad would conclude what's bothering you right now that you're waiting to change so that you can be happy one day. Whatever you're waiting for is the latest lie you might be telling yourself because you have everything you need to be happy now.
right now. That's because happiness depends on whichever part of your brain you're activating.
to deal with life's challenges and what emotions you're experiencing. And I'll end Shirzad's mini sermonette presented by me right there. Again, I'd love to have him back on this podcast in the coming weeks, and we'll kick through a few more of these points, because I feel like they're so relevant, not just now, but they are, but really to all time and to all people. So, Paul, as I read your note, and you said, you know,
How do you balance the clear logical advantage of saving early and often with the emotional need of enjoying life now? And I ask myself, and maybe I'll ask you rhetorically this question, is there really a balance between those things, between saving early and often and then the emotional need of enjoying life now?
I would say that saving early and investing are basically their own reward and are much more likely to fuel your present and future happiness than if you didn't do it. And I truly side with Shirzad when I say that if you're not feeling the emotional need right now of enjoying life, you might want to harness that part of your brain. And it's right there in your head, that part of your brain that says everything can be a gift.
and an opportunity if you just frame things up that way. So I can't obviously speak to your present mental models or what you're using, but I can certainly speak to you and to Gordon's Gecko asking how do we
in this overstimulated world, try to simplify and lead a more interesting life. And for me, anyway, a lot of it comes down to making sure that you are enjoying where you are right here, right now. I hope you're enjoying this podcast. I hope you enjoy tuning into The Motley Fool on a regular basis or Rule Breaker Investing. Anytime I can be there for you, helping you lead a smarter, happier, and richer life.
I think I'm going to speak a little bit more to this later in the episode, so stick with me if that wasn't satisfying enough, because there's another similar sentiment coming. But I hope that invocation of Shirzad's memorable words, you'll be happy when dot, dot, dot, fill in the blank. I hope you recognize that you and I have the power to be happy right now. And darn it, let's activate it.
All right. Rule Breaker mailbag item number three, this one from At Forward Tracks, chiming in again on Twitter X. By the way, I'm at David G. Fool on Twitter. And as I already mentioned, our Rule Breaker Investing podcast account is at RBI Podcast. And we do pay attention when people tweet things out. Sometimes those tweets end up in mailbags.
At Forward Tracks, you asked, what is an effective approach to diversify an existing portfolio of mainly, you wrote, FAANG stocks?
So, what is an effective approach to diversifying an existing portfolio? You know, I'm almost going to park the idea of FAANG stocks. It's not a phrase that comes trippingly to my tongue. I can't even remember what all of the letters stand for. It's a little bit dated. There's a tendency in the media to get a group of stocks and then give them a label that lets them talk about the big performers of our time. I remember some years ago, this around FAANG stocks, more recently people say
Magnificent 7. I'm just going to park that for a second for a track. So let's just talk about diversifying an existing portfolio of anything. And my first thought is Rule Breaker Portfolio Principle No. 4. I have an entire chapter dedicated in my Rule Breaker Investing book coming this fall to this Principle No. 4, and that is establish your sleep number. Let's talk about it.
The sleep number has come to us from the mattress industry. Some of you may sleep on a mattress that has a sleep number. You're able to dial in a number from zero to 100, giving the firmness to your side of the mattress. And if you have a sleeping partner, he or she can dial their own number in. It's their sleep number, probably different from your sleep number. And a sophisticated sleep number mattress allows you both
ideally to be comfortable with your personalized firmness. So that is the established phrase, sleep number. It's dedicated to mattresses, but I've co-opted that phrase because I think it's even better and stronger and more relevant for investors. Your sleep number in an investing context is the maximum percentage that you would allow a single stock to reach in your portfolio and still sleep well
at night, your sleep number. So for example, if your sleep number were 10 as an investor, what that says is that once a stock becomes 10% of your portfolio, you no longer feel very comfortable with it at that size. You wouldn't want it to get to 11 because your sleep number is 10.
And a lot of people probably have a sleep number somewhere around 10. I'm thinking especially of people who buy stocks directly, who follow Motley Fool services, who believe that buying stocks is worthy. I strongly believe that, as opposed to merely indexing with funds, which is a perfectly fine practice. But people who index, people who diversify with funds usually have a sleep number around one because they're in massively diversified markets.
investment vehicles, and they wouldn't feel comfortable not being that massively diversified. Now, people like me who only buy stocks for the most part directly, who build up stock market portfolios, I think sleep number around 10 might be standard. For some people, it might be 5%.
For me, these days, in my late 50s, it's much higher. And it always has been throughout my life, in part because, well, if you paid attention to my page-breaker preview quote this week, I can just mention that my largest holding is actually my Motley Fool stock.
And that's true of a lot of people who have their own small businesses. Your largest source of wealth, when you think about it, is probably the company that you've started, that you're running. And you might well have quite a high sleep number if you think about it that way. But because I do have my private company stock, I've always felt licensed to take more risk and have a higher sleep number in my stock market portfolio. And I would say my sleep number is probably around 30 or 35. I am comfortable
I am willing to allow a single company, one, of course, that I would deeply admire, that I would have high confidence in, to take up as much as a third of my portfolio. I'm not recommending that to you or to anyone else. That's crazy talk for most people out there. But since I try to authentically share myself with you every week, that's around what my sleep number is. But the main point is not what mine is.
It's what yours is. And at ForwardTrack, since this is your mailbag item, you were asking about an effective approach to diversifying an existing portfolio. And to me, it starts right there, knowing your sleep number. So if this is a new concept for you, I highly recommend you thinking about what is that number?
above which you would simply start losing sleep and not feel comfortable if you had your stocks, FAANG or otherwise, invested at that level.
And then for most of us, assuming that we're staying under our sleep number, there shouldn't be much problem with diversifying a portfolio as long as we're not tripping over that sleep number. I think maybe for a lot of people, the reason they're not more diversified than they are is because maybe they don't have enough stock ideas. They don't have enough recommendations for
coming in. And of course, that's something that The Motley Fool is pretty good at. I'm going to shortly read my weekly plug for Motley Fool service. And you're going to see as I talk about Motley Fool Stock Advisor, I think it's a great example of a way to, in your words at Forward Tracks, to diversify an existing portfolio. So if you find yourself over-concentrated in a few stocks, even if you really like them, if you're tripping over your sleep number, I highly recommend
diversifying your number of ideas. So here comes that plug. If you're like AdForwardTracks, you're looking for more new stock recommendations, new ideas to diversify and strengthen your portfolio, head over to fool.com slash sign up and join Stock Advisor. That's our flagship investing service. As a Stock Advisor member, you're going to get two new stock picks each month
rankings of a whole scorecard of companies and access to all episodes of our premium podcast. And that would be Stock Advisor Roundtable. That show is only available to premium Motley Fool members. It focuses on foolish recommendations, takes a deeper dive into the businesses we cover, featuring Fool analysts you already know and love, I hope. I often have them on this podcast. I'm going to have a few on next week, once again, from listening to this podcast and, of course, our flagship podcast, Motley Fool Money.
My brother Tom, by the way, appears regularly on bonus episodes of Stock Advisor Roundtable to discuss what's new in the Stock Advisor universe and to answer questions sent in from Motley Fool members. So again, that URL is www.fool.com slash sign up.
Now, it's rare that I thread a product plug into a mailbag item, but that was actually very natural and easy for me to do because I think most of the world needs better stock ideas. And I think that's really the purpose of The Motley Fool. We're not always going to get
every pick right. I believe in my history as a stock picker at The Motley Fool, I picked more bad stocks than anyone in Motley Fool history, but I also had an outstanding record of market outperformance because I'm willing to diversify, invest in lots of different companies, and yeah, have a lot of losers too. The beauty of the market, as I'm sure you know at Ford Tracks and everybody listening, the worst you can ever do with a bad stock pick
is minus 100%. The best you can do is infinite. The math is wildly in our favor, even if for a hard-wired biology makes it hard for people to lose, makes it hard to lose. But I think I've always been disconnected. Maybe my wiring doesn't quite work, but I don't care that much about losing. I think a
A key thing at Ford Trax is being willing to lose to win. It's one of my primary themes often sounded on this podcast. I can look back over a lifetime of stock picking and see how many losers I picked and how my biggest winners on their own wiped out every loser I ever picked. And that's true of Motley Fool Stock Advisor and Motley Fool Rule Breakers as well.
All right, on to Rule Breaker mailbag item number four. This one comes also via Twitter, xatthestonkmeister.com.
And you wrote, Canada's in the news today. We're pretty mad at the U.S. up here. And I could use some DG, that would be my initials, some DG optimism. I'd love to hear your take on how Canada and the U.S. can get back on the win-win track that has been so good for both countries over the last few decades.
Well, thanks for asking. And I think this is obviously on the minds of many people, not just in the U.S. or Canada, but also worldwide. And since about one in five of our listeners comes from outside the United States of America, I'm happy to take a shot at answering a few of the questions that are implicit in what you're inquiring about at the Stonkmeister. Let me start by saying I can't solve every trouble.
You can't either, but I think we can reflect together on a few things that matter. The first one, just thinking about the United States and Canada, I want to say our relationship as countries has not just been good for a few decades. I would say it's been good for a few centuries.
and our relationship runs much deeper than 100 days of questionable leadership, I would hope, I would hope, I can only hope because I'm an American, I would hope Canadians can recognize that there is no nation in the world that the U.S. aligns with better than Canada. So, that's thought number one for you. Thought number two, I realize that the stock market
is down from its recent highs. It's also up from its recent lows. I think it's worth this reflection. The U.S. stock market, the most important one in the world today, is near all-time highs. It is down 10% from the all-time highs it hit two months ago, but it's also up 15% from the recent lows it hit two weeks ago.
ago. Stocks always go down faster than they go up, but I think they'll always go up if you give them time more than they go down. So I think it's worth reflecting that the market is near all-time highs.
And I realize there's a lot of negative sentiment out there today. So thought number two is things are actually more positive than I think a lot of people recognize. And I'll at least just point to where the stock market is right now. I realize it's just one indicator. It represents financial sentiment, not necessarily human sentiment. But I pay a lot of attention to financial sentiment. Here's a third thought.
The private sector, I point this out a lot, I find myself especially talking about in the last year or so, the private sector is a lot bigger than the public sector in the United States of America. So despite attempts at political overreach, whether now or in the past,
overreach that may make Americans wonder just how much the federal government is promoting what I would call our most American value, and that would be liberty. The federal government is actually tiny compared to the rest of the nation. So while its powers can be vast and can be very good, I would say vast and good powers
only accrue to the federal government to the extent it guards America's liberties and promotes American values. You know, the majority of Americans, recent polls show, are not very approving of our somewhat chaotic state right now. Already after just 100 days, even those who may have voted for this in part are opting out. I personally think that's because
A lot of the rhetoric and some of the action taking is, and I'm going to give a very tight definition of this in a second, is not exactly American.
One of my themes over the years for Rule Breaker Investing has been to look at the values that we hold deeply as investors or as people working at organizations. How many organizations, perhaps yours too, dear listener, have core values that were decided on by the founders or leadership and maybe sometimes updated from time to time, core values that should be upheld and held dear. And in a divisive political environment, I've
often like to ask friends, co-workers, people I bump into on the train or at a cocktail party, I like to ask them this simple question. What do you think America's core values are? And at least to me, the five that come to mind first are liberty, justice, enterprise, resilience, and kindness.
And I think all five of those, you may agree or disagree with any one of them, but all five taken together, for me anyway, describe the America that I've grown up in, that has existed before I lived, and that I believe will continue well past my own lifetime. Values change from time to time, but they don't change as quickly as you might think. They don't change in 100 days, and they don't change despite media megaphones or social media that seems to drive people's actions. I think...
I personally think they run deeper than that. And I want to go on from there, maybe to speak to a point number four, because at least for me, if you start thinking about liberty and justice, enterprise and resilience, some of the people that I value most are people who came to this country in the last few years or the last few decades. And I'm talking about immigrants.
And by the way, if you define immigration broadly,
97 to 99% of present day Americans trace all of their ancestry to people who arrived after 1492. So if you really think about America, you realize we are by definition an immigrant nation. So I can't move on to rule breaker mailbag item number five without mentioning that
If there's anything truly un-American that I've witnessed in the last few months, it's the intended demonization of
of immigrants. I realize the focus is on illegal immigrants, and I think upholding a law is important. And if we need better laws, since justice is one of my favorite of America's core values, I would want us to have better laws. But treating people who don't look like us or don't initially sound like us as if they're not part of us, I object to with maximum force.
In fact, I was reminded recently by a friend of what President Ronald Reagan said in his final speech as a president, dated January 19th, 1989. I don't care whether you're Republican, Democrat, or like me, an independent. I think I, anyway, truly love these words. Here's what he said, recalling what someone had once written to him. Quote, you can go to live in France, but you cannot become a Frenchman.
And Reagan continued again in his final speech, quote,
We lead the world because unique among nations, we draw our people, our strength from every country and every corner of the world. And by doing so, we continuously renew and enrich our nation. While other countries cling to the stale past, here in America, we breathe life into dreams. We create the future and the world follows us into tomorrow. Thanks to each wave,
of new arrivals to this land of opportunity. We're a nation forever young, forever bursting with energy and new ideas, and always on the cutting edge, always leading the world to the next frontier. This quality is vital to our future as a nation. If we ever close the door to new Americans, our leadership in the world
would soon be lost, end quote. And by the way, historian Heather Cox Richardson, just a couple of days ago, re-invoked those beautiful words. I personally think American citizens today are far more deeply rooted in American values than headlines and bluster, whether it's from the media or the administration or social media, would lead you and me to believe.
And I guess I would be remiss if I didn't mention, before moving on to the next point, that I do have personal experience with the U.S. president. He was once on the other side of the table from me. I was short his stock, literally, back in the day. Some of you know that story. I've told it in the past. I probably will again in the future. So my conclusion, after more than 25 years, is that what you hear from the Oval Office and or from the megaphone that I've heard dating back to when
DJT was a great short for us in the 90s.
It's not real. A lot of it is posturing. I think we've already seen stuff walked back. So it's a very strong bet to bet against it being real. There's really not much demonstrated history there of building anything sustainable or leading followers to goodness. Now, that's my own lived experience. I owe it to you to share my viewpoint, shared here with a Canadian friend, a new one, but really just shared from one human to others listening. And my money is where my mouth is at all times. And I'm fully invested.
And in part, that's because my expectation is that much of what appears real or sounds threatening today is something between unlikely to happen and a bad joke. We'll see. Just remember that business is the real energy that powers the world, not a U.S. president or a Congress.
that are at or near approval lows. In conclusion, I think about trust. George Shultz, former Secretary of State, wrote that wonderful essay. For anybody who has not read it, trust is the coin of the realm. I very much trust in trust. I trust the future of the companies I'm invested in
I trust the good that I believe that they are doing today and will be doing even more in the future. So that's why I'm invested. I'm not trying to sound optimism for optimism's sake. I'm just sharing with you what I've learned and why I'm doing what I'm doing. And Tom Engel, a longtime Motley Fool commentator member. Tom, you might be listening to me right now. I occasionally bring out an incredible quote that he simply wrote on our corporate Slack a few years ago, and I copied it.
And I've read it back. I'm going to do it again one more time here from time to time. And this is going to speak to some of you powerfully. And for others, you may not feel this really describes you. And if not, that's fine. Not everything speaks to everyone. But I love these words from Tom Engel. And I hope it helps you, whether you're in the U.S., Canada, or anywhere else. Tom Engel wrote, I have one big rule. I never worry about anything. There's no point to it.
Some things are just not in our control. I always felt it's within all of us to win regardless of the circumstances. A man can win even with terminal cancer if he doesn't succumb to fear and pain and dies with dignity. Not always easy. But for those not facing death, to worry is just energy wasting.
I have lived through many presidents. None of them changed my life for the better or worse. I just stepped outside admiring the fall colors, fresh air, cool temperatures. Neither Clinton nor Trump could ever change this day for me for either the better or the worse. It is not in their power.
So if a change in president saps my strength, well, the weakness, Tom Engel wrote, is mine. So far, no president has had that type of power over me, and I hope they never will. But if they ever do, it is my weakness. I strive to make the world a better place every day of my life, and that is all any of us can do.
All right. Rule Breaker mailbag item number five. This one coming from frequent correspondent. Always great to hear from you, Dave. Dave Gak. Dave, you wrote in about baseball listening to the podcast last week. Dave, you wrote, first off, listening to the latest podcast, I can report that in minor league baseball, my hometown of El Paso, Texas, has a AAA affiliate known as the Chihuahuas.
In minor league baseball, they have a rule where the offense or defense can question the umpire's call of a ball or strike. Each team is allowed three we-were-wrong reviews. An opportunity to review ball and strike calls. Batters or the pitcher or catcher have to signal immediately. Now, reviews use five cameras and display a strike zone box on the scorecard. If overturned, the call is reversed immediately.
without costing a challenge. Of course, if it's not overturned, then the challenge is lost. Dave asked two questions. Do you know whether that box is aligned to the front, center, or back of home plate
and how they handle breaking pitches, for example? And two, is the vertical size of the zone customized per batter's height? Or is it just one fixed zone used for everyone? Well, not knowing myself, Dave, I checked back in with my expert friend guest last week, Kimball Crosley, a Major League Baseball scout. Kimball wasn't even quite sure himself, but he said to your first question, whether it's a box, Kimball said he does think it is. It's three-dimensional.
He's not positive about it, but it's not just a 2D little white frame.
It's a box they're looking at. And then as to your question of whether the size of the zone is customized to the batter's height, Kimball again said, I do believe so. He did add, they've been experimenting with these and other matters over the last couple of years at different levels of baseball, so it may not all be fixed yet. Anyway, thanks for listening, Dave, and thanks for your baseball questions. Always a pleasure to tackle baseball questions. You know, you also wrote a separate note that I want to reference because one of our topics
This month, it was also a topic last month, is when to sell and how to diversify a portfolio. So on last month's mailbag, check it.
listener Rod Reed wrote in, and he said, and I quote, a couple of contributors recently asked questions about when and why to sell stocks. Now, as one, Rod wrote, who almost never sells stocks, it caused me to think about my own practices and wonder if I should approach my portfolio differently and consider the opportunity costs of holding onto some stocks instead of selling and investing in something different. Rod went on, and as I did so, I thought back to the way Jack Welch
former CEO of General Electric, reputedly required his leaders to rank their employees and fire the bottom 10% each year. Now, while I think this is a terrible way to run a company, Rod concluded, it did make me wonder if it might be a good way at least to evaluate my portfolio. So I'm happy to bring that one back briefly again this month because I'm
I think in some ways it speaks back to our earlier question from my new friend at Forward Tracks, wondering about effective approaches to diversifying portfolios. And certainly, I personally have made a habit often of selling off my losers at the end of each year, which helps zero out capital gains of any winners you might be selling off as well. So I can kind of see that approach. But Dave Geck, just to continue forward a little bit with you, you wrote in the following, reacting to Rod's note.
Last year, you said in a recent podcast, you mentioned Jack Welch's policy of eliminating the perceived bottom 10% of the salaried workforce. Dave Geck writes, I worked at GE.
at the time, and offer my insights as an observer and implementer, but not, of course, as an official spokesman. That policy applied only to salaried associates, Dave Geck writes, not hourly workers, and assumed that entrenched veterans held back
back change. For example, at our feeder plant in Morrison, Illinois, one junior salaried person had over 25 years with the company. He knew every failed experiment. We tried that before. It didn't work. He resisted new processes. He risked leaving us with a talent void when he eventually retired. Yet his institutional knowledge, Dave writes, was vital.
Conversely, at my plant in Juarez in Mexico, I'd been manager just 10 months, making me senior to 44% of my team after just being there 10 months. Their stability mattered more than vitality. Yet because the king's word was law, Dave writes, we still had to cut 10%, even when the weakest performers were the brand new hires who hadn't yet had time to learn.
Dave concludes in his remarks, and I'm sharing it just because I love hearing the personal experience of people working under storied regimes like Jack Welch at GE. And even Rod comparing that last week to how to manage a portfolio, everything's connected. Anyway, at the end, Dave, you said in Morrison, Illinois, the cuts devastated a small town that had no local talent pool. So outsiders replaced lifelong employees in well-paying jobs at a company that
with no prospects that left both plant managers and displaced workers asking, was this really worth it? Again, Dave, thank you for your perspective, both your baseball question, but even more some of that wisdom around General Electric and whether we want to fire the bottom 10% of anything.
On to mailbag item number six, this one from Kevin McMahon. Thanks, Kevin. Hello, David. I hope all is well. I wanted to share a few thoughts and a question for possible inclusion in an upcoming mailbag episode. I'm writing this on Thursday, April 24th.
This may have been my favorite month of Rule Breaker Investing episodes yet. Thank you for such outstanding content. I really appreciate your conversation with Paul Rice. Fair Trade USA is an incredible cause. Your interview is a powerful reminder of why I'm proud to be a donor. I'm also really looking forward to the release of Paul's audio book,
Further, my father and I are longtime admirers of Bill James, so I thoroughly enjoyed your interview, some of that baseball talk with Kimball Crosley. I'm looking forward to revisiting your past conversation with George Foreman in that upcoming bonus episode, What a Remarkable Human Being. Now, Kevin writes a bit of background and a question. I'm a proud Motley Fool member, but the last four years have been tough for me.
I subscribed to Tom's Everlasting Portfolio 2021 service and invested heavily in many of its recommendations shortly after launch in July 2021. Kevin writes, since then, the portfolio is down 27% while the S&P 500 is up.
29.8%, a painful 57% gap. My question, have you personally felt a similar kind of hurt in your own portfolio during this time as Tom and I have? Thanks again for all that you do. And as always, full on best regards, Kevin McMahon. He includes a postscript. This email was co-written by a human me and a helpful AI chat GPT. I'm hoping the combo boosts my odds.
of a podcast feature. Well, first of all, Kevin, thank you for writing and thank you for your kind words and also for sharing some of that pain. Let me say a few things back. The first is that at any point in time, if we start our investing and just confine it to that point in time, we risk bad luck. And I would say anybody who started investing in July of 2021, or maybe didn't start, but you mentioned you invested heavily
in July of 2021 has not done well. My Rule Breaker stocks do not look very good from July of 2021. I'm not familiar with Tom's service numbers there, but it sounds like they don't look good either. And I would say a lot of stocks, especially ones with high multiples, haven't done great
underperformed the S&P 500 over the last four years from that point in time. I think my critical point back, not just to you, Kevin, but to everybody listening, is that Motley Fool investing is about being regular with your saving and regular with your investing. Just like
market studies that show if you had invested everything at the top of the market at the start of the Great Depression or at the top of the market just before the market caved in 2008, 2009, or even how about that first month of COVID when the market lost a third of its value. If you look at the market that way and plunge all of your money in at a certain point, you can prove almost any point you'd like to. You can prove that you shouldn't invest in the stock market because it did so poorly in the succeeding years,
or you could prove that you should invest in the stock market if you're picking a different date by showing how well the market did over whatever period of time. I think the key is the best way to diversify and iron out your returns and ensure that you're giving yourself the best chance of beating the market over time is to invest in July of 2021, August of 2021, skip forward December, January of the next year, January of this year,
etc. And so while this may or may not help you looking backwards over the last four years, I hope it does help you looking forwards from this date and not just help you, Kevin, but everybody else listening. One of the things The Motley Fool has emphasized most, I'm always talking about it on Rule Breaker Investing, is dollar cost averaging into your favorite investments, being regular over time. Because if you do put it all in or take it all out
in a given month, you were putting yourself in position where bad luck or good luck could be over-weighted in terms of your overall returns. So Kevin, let me just say,
Thank you for being a Motley Fool member. My heart goes out to you that you've underperformed over the last four years. I believe if you stay invested and keep investing, you won't just get back to even, you'll outperform in the years to come. And even if you're underperforming a little bit 10 years from now, let's also pinch ourselves and remember that the stock market on average returns 9% to 10% per year. And
And so even underperformances of as little as, let's say, 6.5% per year outperform almost every other investment vehicle. So, of course, my aim, Tom's aim, our aim at The Motley Fool is to help our members do as well as they can. Not everybody, by the way, is trying to outperform the market. A lot of people are after dividend stocks. So I have Matt Argersinger on to talk about income investing. Or they're more into wealth preservation because they're near the end of their lives, setting up legacies for their future generations.
many different Motley Fool members with many different motivations. But I'll at least say that Rule Breaker Investing, this podcast, my coming book this fall, everything that I stand for, I'm
I'm about trying to beat the market. And we've done that consistently, not over a given year or two, but over a given decade or three. And that's really what matters most to me. I hope that matters most to you, Kevin. Again, best wishes and thanks for sharing. You know, I read a wide variety of notes that come in. Of course, I love hearing from members who are doing well and outperforming with our services. But how many times, whether it's this week or many past mailbags, am I happy to share people who have not done well or
who wonder how they could have done better, whether it's with our services or anything else. Again, the purpose of The Motley Fool is ultimately to help make the world smarter, happier, and richer. And I hope we're doing that most of the time. I know this, Tom and David and our merry band are trying our best from one day to the next to do that for as many people as we can reach as possible.
All right. And on to my final one this month, Rule Breaker Mailbag item number seven, this one from Brian Bickoff. Brian, kind of a personal question for me. I really appreciated it. You wrote, it's been a while since you stepped away from daily work on stock picking. What do you miss about it? Any other thoughts or observations on the semi-retired life? I've been a listener, Brian writes, since the beginning. So I'm glad to have a question air on the mailbag. Brian Bickoff.
Well, as I mentioned, Brian, thanks. Thanks for asking. I appreciate it. I'm always happy to answer a question like this one as well. I did formally stop picking stocks for The Motley Fool in May of 2021, announced a few months before that to all of our members. But of course, I continue to pick stocks in life. I don't do so very frequently. When I pick stocks for The Motley Fool,
I had to pick a new Stock Advisor stock every month, two new Rule Breaker picks made every month. I also picked five Best Buys Now for Stock Advisor and five Best Buys Now for Rule Breakers. So I was making 13 accountable picks monthly for about 20 years. It was a lot of work. And as I said at the time and say to you now, Brian, I think you know this about me, I love doing it.
And I was good at it. And I continue to do it. It's just that I don't have to do it with a deadline and with volume and frequency that I once did. So I want you to know that I'm, as I mentioned earlier this episode, 100% invested in the stock market as I
have always been. I continue to love the companies, all of which I picked for our services, many of which are in my portfolio, companies like Intuitive Surgical, MercadoLibre, Netflix, of course, at or around all-time highs right now, classic rule breakers. Over the years, I picked seven 100 baggers, actually 100 plus baggers for Motley Fool services. And many of those are in my portfolio. I hope at least one
is in yours. In fact, if even a single 100-bagger is in any of our members' portfolios, and I know it's in some of your portfolios, dear listeners, then that on its own is probably enough to set you up potentially for early retirement. I picked seven 100-baggers for Stock Advisor
and for Motley Fool Rule Breakers. I, of course, share all of the thoughts and stories around those and the teachings and learnings in Rule Breaker Investing when it comes out this September. When you're asking me how I've been spending my time, that obviously was a huge calling for me last year, gathering the 15 years of notes that I'd saved in order to write my final word on stock picking.
That's how I spent last year. This year, I'm trying to reach as many people as I can to get as many people aware of Rule Breaker Investing, challenging the conventional wisdom around the stock market, making better decisions. If last year was about writing, this year is about selling, getting the word out, getting as many people invested, frankly,
on the train of the stock market, which as it stops at each depot one year after another, it rises on average 9% to 10% a year. And our Rule Breaker stocks outperform that. And the more people who understand that know that through all market
cycles, including the one we're in right now. You should be 100% fully invested. You'll do much better your whole lifelong if you do that. That's the word I'm trying to get out. Of course, in addition to writing the book, I'm helping co-chair our company. I'm chair of our Motley Fool Foundation. I do this weekly podcast every
every week, almost 10 years and counting at this point. So making myself available to any and all fools, whether it's our employees internally or our members, like many writing in this week, or you listening to me right now, anybody who wants some input toward leading a smarter, happier,
richer life. Those are the things that give me joy, that help me lead a more interesting life. I don't use the word retired. That's not a word I've ever really used. I don't aspire to retiring. I aspire to lifelong engagement. It's just what do we want to engage on? What brings us the most joy? At least for me, having
pick stocks for our members for 30 years. I just decided at a certain point, reaching my late 50s, I didn't want to keep doing that every week, every month. I wanted to spend time in other ways, and I've been enjoying doing that some too. I have continued to pick some new stocks just for my portfolio, stocks like Duolingo, Palantir, Rocket Lab USA, Toast. Those are all recently
recent companies in the last couple of years that I've added to my portfolio. Personally, those are what I would call rule breakers. That's not a full list and they may or may not end up being good stock picks. But I want you to know I continue to think about where our world is headed and how I'd like to have my money invested. So, Brian,
I hope that in large part answers your question about how I'm spending my time and what I really love. You asked, what do I miss about it? I don't really miss anything about it because I continue to do the things that I love that I was doing before.
What I'm grateful for is that I don't have to do it every month with deadlines and a lot of pressure, a lot of people following along with what I was doing. I'm grateful for the efforts of our company, from my brother, our CEO, Tom Gardner, right on down to our newest employee, whoever we're just hiring next week. I love our company and what we're doing, and I remain involved just
just not every day in every way. So Brian, I don't know if that helped answer most of your questions. Of course, I'm around next month. So if you want to follow up with a mailbag question on top of what I just shared, you're more than welcome to.
And that's a wrap on this month's mailbag. We dug into regenerative agricultural labels and why you should vote with your wallet. We unpacked baseball's new We Were Wrong reviews at the minor league level. We thought hard about our portfolios, how to be diversified, and maybe some of you were hearing the phrase sleep number used in a new way for the first time. And I loved even getting to include a little bit about Jack Welch's so-called vitality curve.
The idea that you should fire 10% of your lowest performers, whether it was his company at the time or whether it might be your portfolio from time to time. Thanks for all of your great questions and keep them coming. Until next time, stay curious, challenge the old playbooks, and as always, Fool on!
As always, people on this program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. Learn more about Rule Breaker Investing at rbi.fool.com.