By David Gardner
updated September 27, 1999

We now offer our fifth Rule-Breaking principle. Please keep in mind that the publishing of each is only a beginning, because we're most interested in hearing your reactions -- any supportive comments, as well as (in particular) constructive criticisms.

So, these things said, after you read this we encourage you to let us know your thoughts about the principle (and all of the others) directly in our Rule Breaker Strategies message board, which is one of the most active on the Fool every day. Lots of good and Foolish input there. While I can't respond personally to every note in that message board, I do read every post there without fail. And any constructive comments I agree with will be incorporated into this principle.

Which is:

We manage our portfolio under the normal constraints of our personal and work lives. It may shock you how unimpressively normal this is.

We bring an uncompromising honesty to all our endeavors, great and small.

Given this guiding principle in our day-to-day work lives, you'll possibly now see why we have fashioned this particular Rule-Breaking principle of portfolio management. Here's why: I want to demystify who we are and what we do at Fool HQ.

I'm David Gardner. I have invested my own portfolio for 15 years now, in the stock market. (That may sound like a lot or a little depending on your own perspective. From my point of view, I'm too old to be a novice and too young to be an "expert." I like it that way.) Five years ago, my brother and I started a newsletter to share our interest in investing, and our enthusiasm for it, with as many people as that newsletter could reach. We wanted to reach, to teach -- but to do so in a strikingly original and amusing way (those were the profs we always liked most in our own schools). Anyway, through a nice mixture of luck and hard work, Tom and I converted our newsletter into an online site, and here you find us today trying to do what we've always been doing: striving to educate, to amuse, and to enrich our readers. We now do this with 180+ other full-time Fools who are equally dedicated to our mission and to helping you with any questions you have.

We believe people should manage their own money, and that's what we're doing and what we're teaching others to do. One of our primary beliefs is that personal responsibility is not only crucial to the management of one's money, but of one's life! We are here to teach as many people about money as we can, hoping that THEY will be better off and that SOCIETY will be better off for them. The more people taking control of their own lives, the less we'll have people looking to their government, or their boss, or their parents or kids, you name it, to do it for them. At the same time, even as we try to create a better world full of people taking control of their own destinies, alongside that we are trying to create a worldwide community of people united by our beliefs as a form of support system. There was a great void in this, before the Internet came along... but at this point I need to get back on topic. Please excuse! So back to the goods.

I am not an institutional investor. I do not have a Quotron. I do not use a Bloomberg box. I have not met the management of most of the companies I invest in, and unlike Wall Street analysts, I don't get to regularly sit down behind closed doors with management and have them share privileged information about their upcoming earnings prospects. The information you get from me and from us here in Rule Breaker Portfolio Land is mostly just our own opinions -- although it is informed by what we learn from our community. (We listen very carefully.) So if you're thinking we have any specialized form of information that helps us out -- because we're the Internet finance guys, and we MUST know lots of insiders -- you're wrong. We are quite removed from the businesses we invest in, even though we try to minimize that distance by being familiar with their products and services.

Speaking of being wrong, we're frequently wrong. That has led to a long litany of memorable losers in our portfolio. Part of this is bad thinking, but part of it is also because we don't always have enough time to "do things right." (Heck, I'm frequently late with my reports.) Case in point: In 1997, we lost to the S&P 500 for the only year ever, so far. That was largely because we failed to find sufficient time to reinvest the cash that was just sitting on the sidelines in money markets. Long-time readers will know that if we had only taken the time to put that cash in a Spider or an index fund, we would've beaten the market. Why didn't we? We shake our heads. We're just everyday human beings who simply don't achieve all that we'd like.

If this is sounding like a Jimmy Swaggart "I have sinned" confession, I am sorry! I guess I have sinned. But seriously, Jeff and I and anyone else making regular contributions to the portfolio need you to know that we are not always on top of our own stocks.

I was on CNBC a couple of years ago when I was asked about a recent Iomega news development. That development was so recent that I hadn't heard of it -- it had just occurred that morning! I slightly embarrassed myself and the network by showing no knowledge of it. Silly me, I tried to blow that off and talk around it, semi-successfully. But you know what I should have done instead? I should have explained that I had spent the morning co-oping (teaching) at my two-year-old daughter's class, and simply hadn't heard "the latest news" about Iomega. (We don't really invest in such a way that it matters much, anyway -- another good point to have made.) That would've been more "uncompromisingly honest," more Foolish, and frankly, quite refreshing. It probably would've jumped off the screen for the average CNBC viewer, used to seeing all those suits who always have to look like they're pros, totally on the ball.

I use the CNBC story as a perfect illustration of this fifth principle, which says little more (sorry if I've dragged it out too much) than that your faithful Rule Breaker portfolio managers are not the impressive, impeccably dressed, top-gun, networked geniuses that you might expect of people trying to ply their trade publicly in the investment and media world. We console ourselves about this by remembering that we are really not very different at all from anyone else who taps into our site every day, from work or from home, trying to see how their investments are doing and find out some new ideas. In case you didn't already know this, we picked Iomega based on our readers' input. And we have people on the message boards who know far more about Lucent Technologies than we do. But one thing that unites all of us is that we have limited time for this stuff, limited attention, and we're trying to do the best we can based on the attention and knowledge and spirit that we can bring to the endeavor.

This is uncompromising honesty, to which I want to return in closing because it's the foundation from which all of our business efforts must proceed. And you can help us and each other in these efforts. If you ever feel anyone in Fooldom -- and I include every one of our readers, contributors, employees, founders, you name it -- seems to be less than honest, depending on the circumstance, I hope you will either confront them about that quietly, or bring it to the community's attention.

And finally, a short plug, if you're interested in our other core values and the way we work. George Gendron, the editor-in-chief of Inc. Magazine, recently called our company handbook -- I kid you not (this was flattering) -- "the best ever." For fans of the Fool, here's a link to that short and Foolish article, if you'd like to read it. And you can order our company handbook if you'd like to take a look at it (it's rather simple, though -- I don't want to overbill the thing!) -- instructions are in that article.

To close, remember this: Common people investing in common stocks. That's the Foolish way, and it starts with this portfolio's managers.

 Rule Breaker Principles