Financial adviser Tom Gardner, who calls himself 'The Fool'.
Financial adviser Tom Gardner, who calls himself ‘The Fool’. Photo: Dallas Morning News
His April Fool joke gave rise to a popular US website that is soon to launch in Australia.
Plenty of investors mutter that their financial adviser is a fool but what about an adviser who calls himself “The Fool”? Meet Tom Gardner, the chief executive and co-founder of US personal investment website The Motley Fool.
Of course, the name is not meant to suggest stupidity. It comes from a line in Shakespeare’s As You Like It, embracing the concept that the court fool is the only one who can tell the king the truth – often mixed with humour – without having his head cut off.
“Motley Fool really began with an April Fools joke,” says Gardner, 42, who arrives in Australia next week to launch an Australian version of the website, fool.com.au.
He describes how that first prank, in 1993, was designed to warn investors about thinly traded promotional companies. Since then, Motley Fool has grown to 230 staff at headquarters in Washington and another dozen at its British off-shoot.
Its overriding aim, Gardner says, is to create an online community of more than 4 million small investors, who share insights and force more transparency on the big end of town.
“At the heart of our message is that nobody should make important financial decisions in isolation,” he says.
The site has also continued its April Fools educational pranks, including publishing a huge letter of apology retracting its claim that 90 per cent of managed funds do worse than the index.
Its “admission” that it had the graphs upside down and in fact 90 per cent of managers beat the index, generated huge publicity – all the more valuable when the truth was revealed.
“Mutual funds are more of a marketing industry nowadays,” says Gardner, noting that managers suck up 1.5 per cent in fees and this means 92 per cent do not beat the index.
His investment philosophy is centred on helping build and preserve long-term retirement savings for individuals. A key tenet is holding equities for much longer than the US average of just 130 days. “My average is four to five years and some stocks I’ve held for the whole 21 years I’ve been investing.”
Indeed, he says his – and most investors’ – biggest mistake is selling out too early. “It’s more important not to miss that big winner than it is to avoid a 20 per cent drop in value.”
Another key aspect of Gardner’s investment style is to focus strongly on the people side of a business; who founded the business, how good the CEO is, how long they have been there, what staff turnover is like …
He contrasts this with a slavish focus on quantitative, short-term issues such as quarterly earnings and chief executives hopping from company to company to boost their pay packets.
As for investing post-GFC, Gardner says the biggest fear in the US is inflation – meaning investors need to be in equities, not cash, and they need to look for companies with strong consumer demand that allows them to lift prices. “It’s been a bit of a lost decade for equities investors, so the next 10 years should be a very positive time,” he says. “Overall, I’m a long-term bull.”
THE BIG QUESTIONS
Biggest break Deciding to work full time with my brother, David. We grew up as friends, then went to separate schools. It was a bold move to circle back again.
Biggest achievement Our business was hit hard in 2001 [after several advertisers pulled out]. We had to decide whether to sell it or fix it. We decided to fix it [by moving to a subscription-based model].
Biggest regret There are so many. Probably the imbalance between my working and personal life. I’m a 42-year-old unmarried man. I spend a lot of time making sure our company works.
Best investment Netflix [a US company that streams movies and TV shows to computers]. The stock is up more than 10 times over the past three years.
Worst investment Selling Dell stock too early. I sold it with a 25 per cent gain; it went on to increase 40 times in value.
Attitude to money I was taught two things in my family: One, money is a reflection of present and future opportunity; it’s not enough to make money, you have to know what you are going to do with it. Two, spend money on experiences, not things.
Personal philosophy One very important measurement of the success of your life is how much you help to develop the lives of the people you spend time with.