Brothers Tom and David Gardner founded The Motley Fool as an investment advice and stock picking platform. The website has gained prominence through its Stock Advisor newsletter, which has delivered returns four times higher than the S&P 500 since launching in 2002.
This guide examines 10 essential investment principles from the Gardner brothers and their team at the Motley Fool.
Motley Fool Investment History
Tom and David Gardner established The Motley Fool in 1993 as a platform designed to challenge conventional Wall Street wisdom with contrarian investment advice.
The Stock Advisor newsletter debuted in 2002, establishing itself as a monthly stock picking service that has generated over 550% returns across 19 years. David Gardner followed with the Rule Breakers newsletter in 2004, achieving returns exceeding 300%.
The Motley Fool now operates dozens of services, ranging from premium stock picking newsletters to complimentary investment guidance and market commentary.
Core Investment Philosophy
The Motley Fool’s investment philosophy draws from both Tom and David Gardner’s perspectives. Though each brother brings a distinct approach to investing, their fundamental principles align on key strategic points.
Here are 10 core investment principles from the Gardner brothers that shape their strategy.
1. Embrace Long-term Thinking
The Gardner brothers advise Motley Fool subscribers to maintain investment positions “for at least three years.” They recognize that exceptional companies require time to develop and reach their full potential—selling prematurely often means missing the most substantial gains.
This long-term mindset drives the Motley Fool’s stock selection process. Both Stock Advisor and Rule Breakers target companies with five-year-plus investment horizons, with some portfolio positions held for over a decade.
2. Embrace Strategic Risk
The Gardner brothers champion stock investing over safer asset classes like bonds. According to their team, “investing in stocks is the only way to achieve the growth that will build a nest egg.”
Tom and David Gardner advocate for an aggressive investment stance, particularly for younger investors building retirement wealth. They typically recommend allocating approximately 80% of investment portfolios to stocks for most working-age investors.
3. Target Excellence Over Value
The Motley Fool strategy focuses on identifying explosive growth stocks that dominate their industries. Rather than settling for mediocre companies trading at discounts, the Gardner brothers advocate paying premium prices for companies genuinely transforming their sectors.
“I try to find excellence, buy excellence, and add to excellence over time,” says David Gardner. “I sell mediocrity.”
4. Let Winners Continue Winning
David Gardner’s key advice to Motley Fool investors: “let your winners run. High.” He advocates buying companies before mainstream recognition and maintaining positions far longer than typical market participants.
This philosophy stems from their conviction that “winners keep on winning.” Rather than attempting to time perfect exits from successful investments, it’s often better to maintain winning positions.
5. Prioritize Industry Disruptors
The Motley Fool centers its strategy on high-growth companies disrupting traditional industries. “I like to find the most innovative companies of our time,” explains David Gardner.
Though these companies carry higher failure risks, their upside potential is extraordinary. The Gardner brothers identified companies like Amazon and Netflix years before most investors recognized their potential—both positions have generated returns exceeding 21,000%.
6. Maintain Portfolio Diversification
Despite their aggressive approach, the Gardner brothers understand that not every investment will succeed spectacularly. They recommend maintaining diversified portfolios containing approximately 20 different stocks.
Their strategy involves starting with maximum 5% positions in any single stock, then gradually increasing allocations as companies demonstrate their value over time.
7. Aim for Consistency, Not Perfection
The Gardner brothers’ diversification focus reflects their understanding of market-beating difficulty. David Gardner encourages investors to “aim for 60% accuracy,” meaning just 60% of stock picks should outperform the S&P 500.
Though this target might seem modest, this approach can deliver substantial returns when combined with letting winners run while cutting losers early.
8. Add to Success
The Gardner brothers deliberately avoid “doubling down” terminology, which implies increasing positions when companies underperform rather than investing in winners.
They prefer encouraging investors to “add up”—increasing positions when companies outperform market expectations and demonstrate continued strength.
9. Evaluate Leadership Quality
The Motley Fool team emphasizes management quality in their investment recommendations. Strong leadership vision proves essential not only for daily operations but also for steering companies through future challenges. This becomes particularly critical for companies attempting industry disruption.
David Gardner specifically advises investors to “look for purpose-driven businesses” and “businesses that value all their stakeholders.”
10. Recognize Cash Value
While the Motley Fool team pursues aggressive strategies with fast-growing companies, they also acknowledge cash’s strategic importance.
According to one Motley Fool analyst, “having solid cash reserves will help you avoid having to liquidate investments at a loss when you need money.” Additionally, maintaining cash reserves positions investors to capitalize quickly when exceptional opportunities emerge.
Key Takeaways: Motley Fool Investment Strategy
The Motley Fool has established itself among the most popular investment advisory and stock selection platforms available today.
Founders Tom and David Gardner encourage investors to construct diversified portfolios featuring disruptive, high-growth companies. Their aggressive strategy, combined with long-term perspective and commitment to holding winning investments, has delivered remarkable results.
Ready to explore Motley Fool’s services yourself? Currently available: discounted first-year rates on Motley Fool Rule Breakers and special pricing on Motley Fool Stock Advisor.
