One of the great joys of teaching is watching a student really absorb the roots of a lesson -- not just a particular set of facts, but fundamentals and processes that they'll be able to apply again and again. And while Motley Fool cofounder David Gardner might not have a classroom, there's no doubt that he does view himself as a teacher. It's not for nothing that the company's original motto was "Educate. Amuse. Enrich." Today, that's been updated to "Making the world smarter, happier, and richer," which, obviously, hits the same themes.
Earlier in May, The Motley Fool asked our Twitter followers, "What investment principles and ideas have you learned from David Gardner?" The answers were so gratifying to Professor G that he's dedicating an episode of his Rule Breaker Investing podcast to a quick refresher course on those lessons. In this segment, we hear that Art Burke "learned the difference between investing and trading," and why he's so right that it's "a very important lesson."
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
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This video was recorded on May 22, 2019.
David Gardner: First one I want to point out was Art Burke, who's @despicabull on Twitter. Art said, "I learned the difference between investing and trading, a very important lesson." I wanted to lead off with that, because I think a lot of us, when we first approach the stock market, or money, or, in this case, we'll go with the word investing, we don't really understand the difference between investing and trading. Art, thank you very much for pointing it out!
I wanted to lead off with this one because I think too much of the world is trading. A lot of people think as soon as you buy a stock, the first thing you should be asking is, when should I sell? What's my price target? If it doubles, I'll sell half, and leave the rest in. People operate off of all kinds of short-term thinking and old saws that never made sense to me in the first place. But the word investing, as I've often pointed out before, and I know be doing it for years going forward, derives from the Latin word "investire", which means to put on the clothes of. And so, as I've taken some pains on this podcast to note, my favorite visual for thinking about how to approach money in the stock market, specifically your money in the stock market, is to think about people who go to sports games -- baseball, football, hockey, basketball, soccer -- and they're wearing the jersey of their home team. They're not going to take off the jersey if their team loses that game that day. Maybe a few will, but I wouldn't call them investors. Those are the traders. Nope, the investors are going to keep that shirt on. And they're going to leave it on, probably for years. And part of the reason they're wearing that shirt is because they love the team. They probably love the stadium or their fellow fans, it's kind of a tribal thing. They love their city. So much of our sports world is geographically minded. We're not talking about sports brands as much as we're talking about cities. That's typically how we've set up our sports leagues. They're geographically minded. But they're going to keep that jersey on. So, too, should you be keeping that jersey on with your investment portfolio. Find companies that you love, that you want to be identified with for years, and look to add to them over time, not buy and then right away sell, and then try to guess where the price is going to go next, or the market overall.
So, Art Burke, you got it! You've learned the difference between investing and trading, a very important lesson, as you say. The reason it's so important is because you're going to make a lot more money, a lot more money, doing the former instead of the latter. I'm sure that there are some good traders out there. But I know two things about good traders. One is, they're few and far between. It's probably not you, it's probably not me now. Maybe it's you; I know it's not me. That's No. 1. No. 2, even if you're really good at trading, boy, does that take a lot of your time and attention. Part of the reason I love investing is because my money does its work for me. I don't have to do anything, I can be off pursuing my own professional career, or my hobbies, or spending time at my kids' soccer games, not trading. Thank you, Art Burke!
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