More Investing Advice From The Motley Fool's "Rule Breaker Investing"

In this podcast, Motley Fool co-founder David Gardner talks about his advice on Royal Caribbean stock and talks with other Fools about helping investors along their journey.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on June 28, 2023.

David Gardner: Last week, a battle of wits. It was our quarterly game show for the 24th consecutive quarter six years of you playing along against my talented guests stars as we all think smarter about the values of public companies that was The Market Cap Game Show and the week before. Review-a-Palooza, looking back at two past five-stock samplers learning lessons from the winners and unfortunately, the losers too. The week before that, well, it was unleashing AIs power for good with our new friend Mohan Tavakoli. In several ways actually it was AI month on this podcast so a game show reviewing lessons from 10 stock picks and a deep dive into artificial intelligence. June 2023 was a Motley month. Now the way we close that every month on this podcast is, even more, Motley than that like the jesters' garments of your, it will be a rag tag patchwork quilt of an episode because this week it's your mailbag. Emily Flippen will join me to talk about getting started investing. Robert Brokamp will join me to talk about getting finished investing. Thinking year of retirement, investing, and other sundry delights, your best questions, our best answers. Mailbag only on this week's Rule Breaker Investing.

Welcome back to Rule Breaker Investing. Happy end of June. It has been a Motley month, it's been an AI month. I was feel some compulsion to justify making sure you heard each of the episodes of a given month as we hit the end of that month so as I think back through the three that have preceded this one, I think of, well, first of all, if you didn't get to hear Mohan Tavakoli talk about artificial intelligence in a way that is understandable to all. Mohan is very well spoken, very well studied, but speaks the lingua franca AI for the rest of us and I think that you really deserve to hear more about our future. I think that that's exactly what Mohan and I did a few weeks ago speaking to the future, we're all going to live together in and through and it's going to be good. It's going to be much better than I think most people think so there's a great reason to listen to the first weeks episode for this podcast. The second week was a Review-a-Palooza. What I want to say about any Review-a-Palooza where we go back and revisit past stock-picks, see how they've done. I think the key thing about Review-a-Paloozas is you get to learn lessons because of course, with every winning stock pick and every losing stock pick that I make, or you make, we have an opportunity to learn lessons but in particular, you're learning lessons over the right time periods so when we go back one, two or three years later and review what's happened to well-known stocks, for example, Peloton go back and revisit we're learning it over the right time frame. I feel as if most people in society, especially those who tend to watch cable TV or follow the markets with more avidity than I believe they deserve, although I'll never again say anybody loving following the stock market, but I think most people learn lessons over the long time periods. 

They're learning lessons over short time periods. They're determining how they're going to act based on some short-term thing that happened and so I think the beauty of that Review-a-Palooza episode is we get to explore things over the right time periods, I think learn better lessons. Then finally, of course, a reason to listen to any market cap game shows to get to play along with your partner, your spouse, your kids, or in this case with Bill Mann and Jim Mueller my talented guests, but it's an opportunity for us to play a game together. We do that four times a year on the show, it's always a highlight for me. I already have September 23 circled on my calendar because that's the next market cap game show, but it's still fresh enough in our minds if you missed it last week, last week's Market Cap Game Show is there for you and your summer enjoyment. Well, we're about to start July, but I want to give a heads-up toward August every year on our podcast, Rule Breaker Investing does authors in August and I've had comments in the past, things like, Hey Dave, it's great that you're having these great authors and books on an August, but why don't you tell us in June who's coming on so I could read a book or two ahead of time and especially further enjoy the interview for that reason. At the end of this week's episode, just for the fun of it, I`ve parked our announcement of one of our authors in August so anybody with some free reading time again, perhaps at the beach this summer. You'll be able to read ahead, I look forward to sharing that with you as little Easter egg at the end of this week's show, but without further ado, let's get into some hot takes from Twitter, June 2023. I'll just highlight three this month. The first is from Frank Iryami. Frank, you are at I-M-A-Y-R-I tricky. You're spelling your name with first initial backwards as your Twitter handle. Frank, you were talking about Peloton reacting to our Review-a-Palooza episode. You said I liked the reference to the brand quotient. 

Did I get that right? Re Peloton Frank ads. I agree it's well North of one we'll talk about what he means about that in a second. In my opinion, he goes on to add smart-backing, strong consumer appeal, overvalued passes the snap tests for three plus million people. Turn around in a strong brand that I use in quotes. Frank concludes, equals ad for me, as in he sounds like you're buying some or some more of the stock. See you in a year on it with a smiley emoji. Now Frank is referring to a brief discussion of Peloton and me wondering aloud, isn't one of those companies where it's gotten so cheap at a market cap of $2.5 billion, that it's not that different from probably the brand value it might be able to garner in a buyout from somebody else. Certainly not a prediction for me or from Frank that this company would get bought out but as you start thinking about where is it trading today and what are some of the values of its intangibles? That's what I sometimes we call the brand quotient or rethink about that ratio of a company's brand value and where its market cap is. I always love companies with strong brands that seem as if that's a lot of the value of their whole market cap. Now of course, Peloton has a lot of struggles. It has an excellent turnaround CEO, I think, but it struggles to make money so it's by no means a home run stock here below $8 a share but at least in the minds of one listener and fellow Fool Frank, you're saying it passes your brand quotient tests so thank you for that tweet. Then just two other hot takes from Twitter and both come from Matt Hardy at 3:07 Fool both on different topics but fine thank you Matt. The first reacting to our market cap game show last week, Matt, you tweeted, I loved The Market Cap Game Show this week. By the end it struck me that it was the human TMFOtter referring to Bill Mann, the human who was the true tie to artificial intelligence month. Bill proved to be his own large language model of company information. Matt concludes here, Bill GPT 1.0 put on a very impressive performance, bravo. That was the first time I`ve had Bill on The Market Cap Game Show. It definitely won't be the last and what an enjoyable friend and co-conspirator toward foolishness for low these couple of decades but also what a knowledgeable and fun person to have a conversation with or in this case, play a game with. Thank you for recognizing Bill, Matt. 

Earlier in the month, Matt, you were reflecting on our Review-a-Palooza episode this way you said it's Wednesday, which means there's a new Rule Breaker podcast episode. I always love five-stock sampler reviews, but I wasn't expecting at investing Nick, that would be my guest, Nick Sciple and at DavidGFool to remind me of hand updating rosters back in the day with EA Sports' NCWA football game, awesome work. Well, I had a fun conversation. It wasn't just about stocks with Nick, but of course we talk sports some too and video games and yes, those days of NCWA football being amateur and therefore electronic arts being forced to pull names from uniforms. You still got to play the video game with, let's say your Alabama Crimson Tide if you wanted to but all of the jerseys just had numbers on them. Real fanatics like me and Nick and apparently Matt as well would go in and edit the players so you could add back their names and play your college football game with the names of the actual players, of course now in the so-called NIL era, the name, image and likeness, which now can earn money for name's images and likenesses that garner enough attention. Whether we're talking about college football, college basketball, presumably other sports too, in this new NIL era, I think EA Sports is coming back with its games with the names on the jerseys. Matt Hardy, thank you for your contributions. Well, six mailbag points for you this week. 

Let's get started with Mailbag Item Number 1. This one comes from Matco and Matt, thanks for writing and thanks for a little bit of a blast from the past here. Greetings David, I noticed an interesting observation recently on September 21, 2007, you recommended Royal Caribbean Cruise Line ticker symbol RCL in stock advisor and then you issued a sell decision for the stock about three months after the great financial crisis of 2008. In other words, that was a shorter-term recommendation of mine, one that lost money and I basically said, let's exit. Anyway, Matt goes on one of the researchers on the stock advisor team recently looked up the figures for me. If you had never sold RCL Royal Caribbean Cruise Line in stock advisor, the stock would have delivered a total return of 147% compared to a total return of 275% from the S&P 500 over the same time period. Just to review, this was again in September 2007. If you just kept holding these last 16 years, you slightly more than doubled your money in Royal Caribbean, but you would have almost tripled your money just in an index fund over that time so Matt concludes thus, RCL would've provided a relatively modest gain but been an under performer. While your reasons for selling RCL were very understandable at the time, does it now look and feel to you like it was a mistake to sell RCL in Stock Advisor when you did? If so, where does that rank among all the investing mistakes you've made either for yourself or on behalf of Motley Fool subscribers? Best regards Matt Cowen. 

Well, you asked two questions there, Matt, the first is, do I feel like it was a mistake to sell Royal Caribbean in Stock Advisor when I did and I'm going to say, no, I don't. I basically M playing the long game. It's rare for me to recommend a stock and exit after a year or two. Usually, I try to hold as many know for at least a decade or two. I think in part it was the really bad financial conditions that we'll remember from the great recession. I just didn't like the dynamics for some of the companies in our portfolio in Stock Advisor at the time and Royal Caribbean a company, I've enjoyed as a customer. A company I admire in many ways was one that just didn't feel like a great pick. Now, I wasn't probably aware of what was going to happen in the next 15 years or so. But now looking backward and thank you because you know, I love looking backward and learning. I'm glad to know, I guess, that this company has underperformed the S&P 500 by over 100 percentage points since 2007. I would emphatically say, I don't feel that was a mistake. I do like to own up to my mistakes and I talk a lot about them on this podcast and have over the years, I don't think that was one of them. The answer to your second question, where does that rank among all of the investing mistakes I've made, either for myself on behalf of Motley Fool subscribers. I'm going to say somewhere down there in the three thousands or so. I don't think it's a top 10 mistake. I don't think it's the top 100. I don't really think that one was a mistake, although I do wish good things for most for profit companies, especially those bringing joy to the world. I think Royal Caribbean is one of them. Thank you for writing in MacQuillan. 

Rule Breaker Investing mailbag, item Number 2. This one comes from Eric Head, right again, for logical reasons as we'll shortly become clear from Knoxville, Tennessee, David I just listened to your Reviewapalooza! episode and the discussion with Nick Sciple centered on the changes in college sports conferences, for example, North Carolina's rumored move at the time to the SEC, et cetera. Those rumors continue. By the way, I couldn't help Eric Head writes, but think of an earlier time, 91 years ago. Sometime ago I was researching the local Knoxville newspapers from the early 1930s for something I was working on. I read an opinion piece in the local paper lamenting the breakup of the old Southern League, a breakaway group that left to form the Southeastern Conference. What remained formed the foundation then for what later became the ACC. The columnist was lamenting the loss of the rivalry. Again, this is the 1930s columnist. Eric is referencing. The columnist was lamenting the loss of the rivalry between Tennessee and North Carolina and Duke, who today recalls, Eric writes that there was ever such a rivalry between the schools. I think this is worthwhile to note that despite the changes now underway in the college sports affiliation universe, the disruption will eventually be forgotten and future fans of the various schools will have adapted to the new rivalries that will ensue. 

For the record, I work across the street in Downtown Knoxville from the Farragut Hotel, site of the Southern Conference meeting in 1932 and birthplace of the new Southeastern Conference. Always enjoy your podcast. Thanks for doing it. Eric had Knoxville, Tennessee. Well, Eric, I really appreciate that exploration of sports history. It was a century ago, just about wasn't it? When these same conversations were happening, I did go back and check at the Southern Conference, the original charter members of the Southern Conference were Alabama, Auburn, Clemson, Georgia, Georgia Tech, Kentucky, Maryland, Mississippi State, North Carolina, North Carolina state, Tennessee, Virginia, Virginia Tech and Washington and Lee. Now, there were some later additions. You mentioned Duke which showed up in 1929. That was the southern conference back then. By the way, the socon is still going today it is. I see here on Wikipedia, the fifth oldest major college Athletic Conference in the United States today, certainly many smaller schools, schools like the Citadel or UNC Greensboro, VMI, Virginia Military Institute, Wofford, all examples of socon schools. I think it's worth remembering that these things have constantly changed over time. As college sports continues to evolve, it's very likely that your kids and mine or their kids won't even remember some of the things that we grew up with and took for granted in terms of the traditions of the schools and the rivalries that they enjoyed. In what ends up becoming Moorabbin later on, Moorabbin Sports Conferences. Things are changing, certainly that's true of college sports today. We talked some about that this month on the podcast. Eric, I really loved your note and the historical flavor that you brought. Fool on my friend. 

Onto mailbag, item Number 3, this one from long time, somewhat frequent, increasingly frequent writer and always appreciated correspondent, Dave Gecc, I was delighted, says Dave to hear my name mentioned and read in the recent mailbag that was last month's mailbag. I listened to it yesterday. Dave writes riding the train from Warsaw to Budapest. One thing I apparently did not make clear was what I understood Jeff Fischer to stat, with which Dave says, I would probably agree that is I did not start with $10,000, but I was still able to go much higher than the $10,000 one shot influx would've given by saving early often and an ever increasing amounts so I'm going to pause it right there. Regular listeners will know that there was a little bit of a debate about saying things like, if you had started with $10,000 in 1970 by the year 2020, 50 years later, you would've made this much in the stock market. Dave had a bone or two to pick with this idea, because sometimes it sounds cavalier in today's dollars to say if you'd had $10,000 in 1970, that sounds like not as much money in 2020 than it did in 1970. Dave having a little bit of fun with Jeff in that regard. But anyway, Dave continues on coupled with compounding, we were able to exceed that amount with the benefit of compounding. Just let Jeff know, I love him. I understand his point was valid. My pickiness. Dave concludes this paragraph is both a blessing and a curse. Now, Jeff Fischer, not in the offices today, here on a summer day, but Jeff did take the time to give a one paragraph written statement which I will share back through this podcast. 

This is not of course, just for Dave, this is for you. Dear listener, Dave Gecc unlocked the secret. Jeff sent me this note earlier today. Dave Gecc unlocked the secret to using the stock market as a savings vehicle and is enjoying the rewards. We of course love that. That in short, Jeff writes, is what the Motley Fool has been about since its start in 1993. Simply putting your regular savings however small into the stock market, perhaps starting with the S&P 500, perhaps only ever buying into that benchmark. For many of us anyway, through the many low cost vehicles available is a grand, simple way to win as an investor. Just a few days ago, Jeff references Fool writer Trevor Jennewine, who wrote an article about this. This is out just this week on our site. You can definitely Google it and find it. Trevor shows that investing $50 per week in an S&P 500 ETF since 1993, turn that small commitment into $432,500 in value today, yes, that $50 per week grand total, $78,000, invested over 30 years, is now worth more than $432,000. Jeff goes on, you might not even miss that $50 per week. So save it and invest it automatically. If you can save and invest more, so much the better. 

Gratitude, Jeff concludes to Dave Gecc from all of us for reminding us that investing one lump sum decades ago isn't the best way to think about investing and it can make it seem daunting. We should all aim to save and invest any small amount regularly. Thank you for writing, Dave. Thanks to Trevor for the article on fool.com. Jeff says thanks for the love Dave from one Fool to another. I really appreciate Dave's poking back at us and Jeff, what a great comment. The importance of just regularly investing. Yes, we love the lump sum stories of the $10,000 40 years ago, but how about just $50 a week over the last 30 years? That ain't bad. Well, I see Emily Flippen is here in our studios before I welcome Emily to the microphone for mailbag item number 4, I will just add in Dave Gecc's final paragraph of his note to me to raise a smile among some and perhaps anger among a precious few. I will share Dave's last paragraph on a side note. He wrote while eating lunch today in a Hungarian restaurant, I saw a steel sign on the wall that said Minnesota Twins and Budweiser. I immediately thought of you. 

You are the only fan of the Twins I know of, although I'm sure the numbers are in the tens of thousands while maybe not that many every day. Dave says I think it's more than that day. But anyway, it made me reflect that although I've been all over the world, I still have four states. I have not visited, Minnesota, North Dakota, Oregon, and Nebraska. I'm pretty sure I landed at the Omaha Airport onetime can imagine why, but I don't count that in states I visited, maybe I will have to go to a Berkshire meeting and then in Twins Game. I can see myself visiting Oregon as there are things there that I would like to experience, but he concludes North Dakota. Maybe I'll put it in my will that I want to be buried there. Can't think of another reason to go. Well, Dave, I think that you have angered a few people listening to us this week, but I suspect you may have made others laugh. I sure did when you said maybe I'll put it in my will that I want to be buried there. Well, I hope that doesn't happen for a long time, Dave, thank you for writing, and thank you as well. Jeff Fischer. Onto Rule Breaker mailbag item number 4 Emily, how you doing?

Emily Flippen: I'm doing well, good to be here.

David Gardner: Thank you. Give me a snapshot of some summer moment, good, bad, or neutral before we get started here.

Emily Flippen: Whenever I think about quintessential summer growing up in Texas, it was always 4:00 PM, a million degrees outside laying out on my back porch nothing to do. For a lot of people, that probably sounds wonderful. In my world, I was absolutely miserable, a morning person. This Texas summer mornings always best, but whenever I think about the summer, I don't know why those sad memories come to me, but they do.

David Gardner: How would you characterize the greater Washington DC area summer this far?

Emily Flippen: Muggy is maybe the word I would use. We've had an unusual, unseasonable amount of rain even as we're sitting here taping today's episode we're watching storms rolling.

David Gardner: Yeah it's big dark. It's not just dark right there. I would say it's black, some of those clouds.

Emily Flippen: I love that weather though. I'm looking forward to it.

David Gardner: It is fun and I know it happens in Texas. It also have us in Washington DC and it has a lot this summer. Emily, great to have you and I wanted to share this next item with you. Let's do this. Brett Wyman. Thank you. Hi David. One of your most well-known lines is make your portfolio reflect your best vision for our future. Well, thank you, Brett, you nailed it. Over the past few years Brett writes, I've used this as a guideline as I've built out my portfolio as a 22-year-old investor. One of the things I've struggled with in building my portfolio is that I have a very long time horizon and Brett writes 10-plus years, I would add maybe 10 plus decades, by the way, Emily, because you're young people, the longevity you might produce is something remarkable. I absolutely appreciate the 10-plus years is way more than most 22-year-old think. But Brett, I think you're thinking about that plus at least I see a big plus there, Emily.

Emily Flippen: Oh, I do too. Hopefully I have that as well. Hopefully, there's some pluses ahead of me.

David Gardner: Emily, how old were you again?

Emily Flippen: Well, I like to think of my head. I'm still 22, although I think I've aged up since then. I'm 28 years.

David Gardner: [ Laughs] That still counts. Yet Brett continues. I am at an age where I have a rapidly changing world view. Brett doesn't say much about what that is in this note. We don't need to speculate about that, but I do find myself curious about that, but we can't ask him that because he didn't speak to it. He goes on though, the companies that reflected my best vision for our future two years ago are different than those today and are likely different than those a few years from now. Do you have any advice for balancing these competing demands between having my portfolio reflect my current best vision for our future and the reality that this vision is constantly changing?

Emily Flippen: This is such a beautifully difficult question. I love it. It's caused me to think to myself about my own portfolio, my own world views and I have to applaud just the perspective that world views can change, that's a level of cognitive flexibility that is rare with humans. I absolutely love the fact that Brett, you're thinking about this and wondering about the world and what's happening around you and how that can reflect itself in your portfolio. But you're right in the sense that if we are overly flexible, it can lead to turnover in businesses. The way that I approach this question in my own portfolio is just being as flexible with the companies that I'm invested in as I am with myself and the world around me, which is to say allow your companies to change over time too and the businesses that you bought two years ago while maybe they're not the same businesses that reflect the exact royalty imagined, give them room to grow into that world as well. Maybe the perspective I would use is a business like Tesla, which I know can be controversial for a number of reasons. But if you're a worldview of your Tesla shareholder and when you bought shares of Tesla, you believed the world is moving toward the electrification of vehicles. Now your perspective is maybe that's not the case. For whatever reason you think it's going to be corn-powered or gas power doesn't matter.

David Gardner: Wait, I'm sorry, Emily, you think things could be corn powered? Are you serious?

Emily Flippen: Can't you create fuel from corn? Am I crazy?

David Gardner: I don't think so. I'm having a hard time seeing this like going big. There's a lot of corn in this country. I really didn't mean to distract you from the channel that the rails that you're on right now Emily keep going. It's just you got me thinking about corn in ways I hadn't been before you said that.

Emily Flippen: Well, it could still be corn, but maybe hydrogen's a better example. Maybe hydrogen more likely to be a fuel for our vehicles over the long term. But let's say that for whatever reason it's not electric vehicles. That's not your best vision for our future anymore. I think you can reflect on your ownership of Tesla and think to yourself, well, that changes things for me and my thesis, the reasons why I bought Tesla they're no longer my best vision for the world and maybe that causes you to sell your shares of Tesla and reinvest in corn or reinvest in hydrogen or whatever it is that you think is that future. But if you're looking at Tesla and you still believe in electric vehicles, but now your best vision for the world is, well I don't know if Tesla is going to be the best car maker. I don't know if Elon Musk is going to be the best leader. I'm not sure if I would use that as a reason to change your allocations. Give Tesla room to change, give Tesla room to grow their competitive positioning, their leadership, whatever it is, that is maybe hanging you up at the moment. Give them that flexibility and that's just one example. It's an easy example because that has the long-term tailwind of electric vehicles, but you can apply that to any number of companies. Compare your original thesis for buying versus what that world looks like in your imagination a decade from today?

David Gardner: Let's say Amazon.com. That one's changed a little bit since it was Earth's biggest bookseller but I'm also thinking more recently, Emily, a company like Facebook. A lot of people thought about Facebook one-way whether they were kids who are like my friends are on Facebook, my parents aren't or maybe then the parents we're all on Facebook, our kids aren't or maybe in recent years, it's not even called Facebook anymore. It's now Meta Platforms and there's some identity crisis baked in there and there was some decline in the stock baked in there and yet, just checking it Meta is an absolute monster here in the first six months of 2023. These companies themselves really morph and I really liked that point you're making Emily, which is it doesn't mean you have to sell. Maybe there's a little bit of a grace period, maybe Brett changes his mind and I love the you underline that he does change his mind because that's really psychologically good unless you're doing it too frequently. But maybe you give yourself a grace period of waiting a year or two to see if you really think that change is in and then perhaps reallocate, but don't do so too quickly.

Emily Flippen: I love that and I will say, if I had to choose between being overly rigid with my worldview and my businesses and overly flexible, I would always choose overly flexible. It's in my opinion, much harder for humans to reflect on themselves and implement change, especially as we get older and just instilling that as part of your investing process is so incredible. But I agree that our businesses are flexible too and they will change and iterate over time. The problems that plagued Meta or Facebook when somebody made their initial investment is probably very different than the problems that plagued the business today. But fundamentally, I think Meta or Facebook is going to be a business that capitalizes upon humans, our data and our engagement. It's always been like that and if your best RoleView no longer sees that as part of its future than maybe that's a reason to change your investment philosophy on Meta. But if you're looking and you're like, I'm not sure about the metaverse right now. We'll give Meta some time. We don't know exactly where there'll be a 10-plus year from now. But that's how I would approach it, which is just being patient, being flexible, but applauding investors who have the ability to self-reflect like that.

David Gardner: He closed by saying, I don't want to end up with a high turnover rate buying and selling companies every few years as that would not be in line with true investing. Yet I don't want a portfolio of companies I'm embarrassed to own. I think there might be something to be said here at the end, Emily, about when we're in our 20s, especially, let's say, early 20s versus the advanced age of 28, we might be changing our worldview faster than when we get to be, let's say 32 or 42 or 72. I don't think that's always true for everybody, but it may well be that as younger people we go through more rapid changes in terms of the education we're getting and early experience that might be shifting how we think you're closer to those ages Emily than I am, but I want to say that more than anything. As we just spoke to with Jeff Fischer's advice, if Brett is simply saving on a regular basis and then adding either two companies he does still believe in his portfolio or just buying new ones there is not necessarily a compulsion to sell. In fact, I think most people would do better to build and grow the number of stocks in their portfolio versus having some small fixed numbers. So I don't think there's a need to sell even if your ideas or your worldview is changing faster than you think your money should.

Emily Flippen: I love that and personally for myself, going through the pandemic, I have a number of businesses that I purchased that have been somewhat of Duds [laughs], and I have not sold a single one for my portfolio and going to Brett's point about holding businesses that he could potentially be embarrassed about being invested I will never feel embarrassed about an investment. I've made some bad investments because all of those are incredible learning opportunities for myself. I see them on my portfolio and I don't feel shame about the business that I recommended or picked that's down 80% versus the market. I reflect on what led me to that decision, and it's always a learning opportunity and so I see them as winners of my portfolio, which is great, but the losers in my portfolio are winners in a cognitive sense. I would just encourage anybody to not feel shame and whatever their investing journey is. Nobody is perfect. Owning and understanding, "mistakes that are made" or businesses that maybe don't live up to that future and taking them as they are at face value, I think is just so important for, always pushing yourself to learn and feel pride.

David Gardner: We love that you care that much Brett and think that hard, that bodes really well for your future. By the way, nobody necessarily knows what's in your portfolio that chamber embarrassing. You only get it if you share it out with others. But I do that on a regular basis. I think it's actually therapeutic, but you make your own calls there, Emily, thank you for that wisdom. Let's move on to Rule Breaker, Mailbag, Item Number 5, and Emily, please stay with me. In fact, stay with me the rest of this show, if you will.

Emily Flippen: If you'll have me, I'd love to.

David Gardner: Done, and you and I are going to invite in our friend Robert Brokamp. Bro, how are you doing?

Robert Brokamp: Great. How are you, David?

David Gardner: Doing really well. I asked Emily this question. She feels well, some of her body language suggests that she didn't think she nailed her answer to this question.

Emily Flippen: Yeah. Mostly because I didn't realize what day it was. I did not realize what season it was.

David Gardner: Well, that's a whole separate topic and it's just like when does summer start? Some people say astronomically on the 21st summer solstice, but then some people say meteorologically on 1st of June. That's a separate thing. Here's the question, bro. Give us a quick snapshot of a summer moment that you've had thus far, good, bad, or neutral.

Robert Brokamp: It was one of the best moments of my life I would say because my oldest daughter got married in Rome.

David Gardner: Oh my gosh. I did not know.

Robert Brokamp: Yes.

David Gardner: Congratulations.

Robert Brokamp: Thank you so very much. It was beautiful. It was expensive. And when you do a destination wedding, not so many people can come as you would like, but for those of us who showed up, it was a wedding to remember.

David Gardner: Was this an Italian gentlemen that she married?

Robert Brokamp: No.

David Gardner: Absolutely no.

Robert Brokamp: She just wanted to make it as difficult as possible. They love travel and just actually a fellow she met at catholic university where she went to college, my Alma Mater.

David Gardner: Right here in Washington DC.

Robert Brokamp: They just wanted to do it at a rooftop looking over the Vatican launches.

David Gardner: That is good. Thank you for sharing that. Emily, that was a better answer.

Emily Flippen: That was.

David Gardner: I liked your hot Texas answer until I heard bro. Let's go on to this question from Charles Anthony, my new friend because I met Charles Anthony at a supper last week. I had the honor of speaking to a supper for the Institute for responsible citizenship. A bunch of guys, it's all guys this particular institute, but they come in every summer as interns and experienced Washington DC over two summers. Charles Anthony was one of them at the supper. You talk about a bright guy who raised his hand with a number of questions. I couldn't answer a mall and that's why he wrote me for this mailbag. I said, hey just send it for them mailbag. But I love his story is you'll shortly hear. It's not long here, but what he's done so far, the age of 22. Pretty impressive. Let's go Rule-breaker, Mailbag, Item Number 5. Hello, Mr. Gardner. He's the only one. You guys don't call me Mr. Gardner. Do you? You're 28 , I'm 57 am I Mr. Gardner?

Emily Flippen: I'm tempted to call you Professor Gardner.

David Gardner: Wow.

Emily Flippen: Because my investing journey has very much been colored by your expertise.

David Gardner: That is very kind and I'm definitely not a professor, but thank you. Hello Mr. Gardner. I did want to ask you a few more questions about investing. Right now, Charles Anthony rights, I have a total of $30,000 saved with 12,000 of it being Investments. He says five in my Roth IRA, seven in my trading account, both with Merrill Edge. I also have 5K in a savings account with Wells Fargo and the rest is in checking accounts. Full-stop. He hasn't asked this question there, but any impressions that either yet from this pretty remarkable 22-year-old.

Robert Brokamp: He's got cash on the side. He's got that emergency fund already started and he's already starting to save for his retirement. Definitely for most people when they are younger, maybe slightly starting out in their career lower income, the Roth is definitely the way to go.

David Gardner: Emily, did you at the age of 22, had you already put away $30,000 in these different ways with stocks, maybe even more, but don't say that.

Emily Flippen: Definitely not. Money still does burn a hole in my pocket, although now I like to buy stocks instead of staff.

David Gardner: We like that about you.

Emily Flippen: But I just remind everybody you have to live life too.

David Gardner: Yeah. I assure you he is. In fact, the Institute for responsible citizenship is a real honor. And these are people who are remarkable and he's clearly one of them from the class of 2025 for North Carolina A&T. Anyway, let's go on with his simple question. Right now, I'm aiming this at you, bro. Right now he says my Roth money is simply cash. Since I didn't know where to invest it. In my brokerage account, I currently hold Google, Amazon, Disney, Microsoft, Tesla, Nike, Spider 500 ETFs. VOO that's the only ticker symbol. I don't recognize that.

Robert Brokamp: That is the Vanguard 500s. He's got two different SP 500s ETFs, which is interesting.

David Gardner: That is interesting. Last one he mentions, and I believe this is Wells Fargo Corporation, WFC, which he notes. Overall, his brokerage account is up 9.66% for the year. Another observation, I'll make a little bit later. His question, friends, how should I invest the cash in my Roth? Let's start with you, bro.

Robert Brokamp: The overall principle here is this, the Roth is a great account because it's a tax-free account, as long as you follow the rules, which is it has to be open for at least five years and you have to be 59 and above. Can you take out the money? There are some exceptions but mostly want to leave it alone for retirement. It's a great account because you don't pay taxes on the capital gains, on the dividends, or withdrawals because it's the tax-free account it's the one you want to grow the most. Ideally, you put in the investments that you think have the most growth potential. Now it's not always easy to predict which investments are going to have the highest returns. Hopefully, after years of experience, you'll figure that out. But you want to put it in the things that you think you have the most growth potential. Now he's going to want to have mostly stock portfolio as he gets older and then maybe tail down risk a little bit as it gets closer to retirement for, but for the listeners who have more diversified portfolios like bonds and cash and maybe more stodgy or stocks. It's easier for them I think to say, l want to save the Roth for the things that I think really have the best potential. Definitely not the cash, definitely not the bonds, definitely not the stodgy or stocks.

David Gardner: Emily, looking over his brokerage account where he mentioned the number of holdings just got about eight or nine stocks or overall investments. What would you do with that if you were adding to it?

Emily Flippen: It's a great start. But these are businesses that are all very well-established businesses, which again, is a great start when you talk about the types of businesses that are foundational and a portfolio which the term that we use in Stock Advisor. The first businesses that virtually every investor can be interested in buying has great examples of, basically US-based innovation or Microsoft, Amazon, Apple, Google, all great businesses. But this is a relatively young investor, has a very long time horizon and there's a lot of great growth opportunities that are maybe not represented in that brokerage account right now. Now, of course, every person is different and what interests one may not interest another, but to Jobro's point of Roth account could be a great place to consider adding some growth year-style investments. Businesses that are maybe a bit riskier but have higher top-line growth potential that our innovative or unique in some way. 

I would consider that. I will add the caveat that while Bro had a wonderfully hundred percent accurate answer in terms of the quantitative approach to investing in a Roth account, I will just also highlight that there's an emotional element that I think comes into investing savings that are earmarked for retirement. I can speak for myself as a relatively young investor who likes to invest in gross-style companies, my IRA is entirely in a total stock market index 1. Because I know myself well enough to know that if I saw my retirement funds fluctuating really dramatically, that could keep me up at night. I'm giving out some of those nice tax advantages by not holding my growth-year-style investments in my retirement accounts. But I like to think that I'm saving myself emotional turmoil in the process.

David Gardner: For my own part, I don't think I've barely ever owned any fund at all and I tend to prefer all stocks all the time. It's just a reminder that everybody has different approaches here. I will say our Fool 401K. I think I'm just invested in our fun because I'm like, I have enough other stocks, I'll just keep doing the really appreciate you both sharing those perspectives. Robert, how much can people max out their Roth IRA with these days I heard you on the has to be five years held at least 59 and-a-half, etc. Can you just give a quick basics? I was getting a number of questions that the suffer from the young man of the institute and I found myself a little bit ill-equipped to speak directly to this. I think a lot of people need to know this.

Robert Brokamp: This year 2023, it's $6,500.

David Gardner: Is the 6,500 poker robust?

Robert Brokamp: That's right. You have to earn that much for it. If you're a student in your summer, Jive only burned you 3,000. That's the amount you can put in. Then it's another 1,000 if you'll be 50 or older by December 31st. I'll point out here also, and it's something I've done with my kids and maybe you have to David, is that once your kids start doing summer jobs, you can open the I Roth IRA for them and the money doesn't have to come from them. I've opened up Roth IRA as for our kids and actually funded at myself just to get them going.

David Gardner: Has it worked?

Robert Brokamp: Yeah.

David Gardner: It's inspiring to have a parent lean in and say, hey, I'm getting you go and maybe some matching, a little bit of gamesmanship there, but just getting them in touch. One thing that Charles Anthony is doing is I think he's buying companies that he knows he can connect with. I think most people who are 22 can connect in some way, shape or form with Disney, certainly with Amazon, possibly Tesla. A lot of people wearing Nike's, etc. I feel as if we've got a guy who's found really good brands of companies that he recognizes and that I think are going to be around in 10-plus years probably profiting at that point, at least I hope.

Emily Flippen: It's a beautiful consumer-facing portfolio and TierPoint, Bro, I got started investing by a Roth IRA, actually, a very similar methodology. I got to stop at Starbucks, my mom's that she would match my contributions 1.1 and I put mine and a very risky biotech fun to my mom, but her's very reasonable index fund. It's a great way to get kids started.

Robert Brokamp: That's what we did. We set them up with index funds, both US international, small-cap, large-cap. But then using actually Stock Advisor, we let them see what were the picks and they pick the companies that they are interested in. Everyone saw, you'll hear them say, like I get what Tesla do, what a Target do, what a Starbucks do.

David Gardner: Well, I suppose we should go on to our final mailbag, although again, having just befriended Charles Anthony here in the last week or so, I feel like maybe there's one or two more things that we could add into the story. Bro and Emily, let me just restate the start of his question again. This is a young man with $30,000, saved 12,000 of it in investments, 5,000 in a savings account, the rest in checking accounts. I'm not sure, Bro if you would reallocate in any way, shape, or form or thoughts there, but it could even be. What about the next thousand dollars or the next $30,000? Your thoughts then Emily's then we'll move on.

Robert Brokamp: I just haven't thought about dividends. He has some dividend payers and his brokerage account, which is great except if you hold them in your brokerage account, you have to pay taxes on them each and every year, even if you reinvest them and if he's going to hold these for years, if not decades, he's going to have to pay a lot of taxes over the years. I would say if he's going to think of investing in dividend payers in the future, tried to keep those in his tax advantage retirement accounts. Whereas if you buy a stock that doesn't pay a dividend, you don't pay any taxes and has built-in tax advantages until you sell it and then you pay long-term capital gains rates which are lower. That's just another thought on what they call asset location. Keep dividend payers in tax-advantaged accounts.

Emily Flippen: I'll come in with the emotional response, which is, this is a 22-year-old in a very enviable position who now has the wonderful challenge of determining where his priorities in life, a fair amount of that money is held in a checking account and that's fine. Maybe that money is earmarked for a trip to Rome. Maybe that money is prioritized elsewhere, but if it's being saved, where do you want to put it? Put it in a Roth IRA. Max out those contributions or maybe put it in a brokerage account because you're going to use that money at some point in the future. There's just great questions about priorities that are risen by the fact that he has saved so much money.

Robert Brokamp: Good job, overall, good job.

David Gardner: Totally. I'll just add as an addendum, I love that he knows he's up 9.66% for this year. I love the scoreboard. I loved the scorekeepers. I love Charles Anthony, that you're taking the time to score yourself and know how you're doing. All good thoughts from us to you keep up the great work Fool-on. Now our final mailbag item and we insist at this point, yes, Emily, you must stay with this. We're having too much fun. I am thinking of you for this one though Bro because we're about to go DRIP in and we're going to be talking dividends a little bit here with Justin D, dear, fools. 

Justin starts greetings from a subscriber who's Gardner-Kretzmann continuum score is dot 975 and who's Sleep Number is 20. Now, before I go on full-stop, Justin is thrown down a couple of terms near and dear to my heart on this podcast, not everybody knows what we're talking about so real quick. What he's just expressed is that whatever his age, let's just say Justin is 32. That means his GKC square of dot 975 means that 98% of his age is how many stocks eons. If he's 32, he's got about 30 stocks in his portfolio. That's what he's communicating through that and then his Sleep Number. Well, that's what I call the amount that you'd be willing to allow your largest holding to grow to as a percentage of your overall portfolio. He's also conveyed very quickly, CEO efficient. These terms are in one sentence he's given us also that he wouldn't allow a stock to grow to more than one-fifth of his portfolio. Now with that said, let's get his actual situation. Bro, in retirement, Justin writes, I plan to supplement my social security TSP is that thrift savings plan?

Robert Brokamp: Yes, that is the defined contribution plan for federal employees. It's like their 401K and is the biggest 401K plan in the United States.

David Gardner: Thank you and we break down our acronyms on this show. Thank you, Bro. Federal pension with a 3-5% monthly withdrawal, he's planning to supplement these things with a 3-5% monthly withdrawal from his Stock Advisor portfolio, only about 15% of my current holdings pay dividends. I have activated dividend reinvestment plans for all of them. Of course, dividend reinvestment plans. The acronym is DRIP, and we'll be using that once or twice more here as I finish out his questions. Justin's asking. It's still somewhat theoretical, he says retirement is a way off. Once retired, I have a planned algorithm of monthly withdrawals from this account, starting with getting fully rid of the lowest performing stocks, interspersed with shaving outsized holdings down to 10% of my overall portfolio basically on repeats. He's setting up his own artificial intelligence. He's got his own algorithms in place and that's what he's doing. Again, he's getting fully rid of his lowest performers and he's shaving down his biggest best performance from that Sleep Number of 20 to a Sleep Number of 10 and he says, rinse and repeat from that point my question is one of realizing maximum gain from my dividend paying holdings in retirement, do I keep my DRIPs activated as I withdraw from holdings based on the above algorithm, this is why we save this one at the end, Bro because we're getting a little technical here. I see you putting on your thinking cap, which looks a little bit like an adjuster cap here.

Robert Brokamp: It's unusual because usually, I'm not thinking too much so. 

David Gardner: Well said, do I keep my DRIPs activated as I withdraw from Holdings based on the above algorithm, or is it more tax efficient to switch all of my dividend reinvestment plans off and use those dividend payments as a portion of what I plan to withdraw? Most of my dividend-paying holdings are somewhat in the middle of the pack in terms of my winners and losers, so I likely will be withdrawing from them last. Before I read the last sentence or two, bro, do you feel like you have enough information right now to process the algorithms to give us the correct answer?

Robert Brokamp: [laughs] I have enough to give some thoughts on the answer. How's that?

David Gardner: That's good. Are they thoughts that you think would be more true than not and more helpful than not?

Robert Brokamp: I certainly hope they'll be more helpful than that. 

David Gardner: I just wanted to make sure because you seemed a little ambiguous with your previous statement, good. So we're going to finish this one out then with a win. Justin says, "Many thanks for indulging. There could be only a marginal difference between these two strategies, but I'd love to know which option could maximize my gains, keep up the invaluable work.'' Signed Justin letter D. Bro.

Robert Brokamp: I'm going to start with a couple of retirement planning principles and these are really in terms of once you reach retirement, you might have a few accounts. You have taxable brokerage account and maybe a traditional tax-deferred account, and maybe a tax-free Roth. You have this question, which accounts do I tap first? Here's the conventional wisdom which many studies have shown. Doesn't apply to everyone, but it's a good starting point, and that is, you drain your taxable accounts first, then your traditional tax-deferred and leave your Roth for last. If you decide to file that step, that progression, then the dividend payers that you have in the accounts that you're not going to tap for years and maybe not even decades, keep reinvesting those dividends. Now here's the other principle. Any money you expect from your portfolio for the next 3-5 years should be out of the stock market: cash, CDs, short-term bonds, treasury stuff.

David Gardner: In retirement.

Robert Brokamp: In retirement. So if you have dividend payers in the accounts that you plan to tap in the next few years, one way to keep replenishing what we call our income cushion, this safe pile of cash is to turn off dividend reinvestment and just let that accumulate as cash so you don't have to sell so much every year. To sum it up, it really depends on where the investment is, in which account, and how long it is until you plan to tap that account.

David Gardner: For years, he was one-half of the superhero duo for Motley Fool Answers for years before that. Starting with Rule Your Retirement, Robert, you've been bringing these kinds of insights to anybody who would be willing to ask in some cases as complicated, sometimes a question, as Justin might arguably one that isn't going to kill it for our podcast ratings. For this particular question, we're getting pretty technical. But Robert, thank you for that thought and thank you for all the remarkable work that you do here at the Fool. Emily, listening to this situation and thinking of that far-flung hypothetical idea of retirement, what thought comes to your mind?

Emily Flippen: I love this question because conceptually, you think about buying dividend companies and eventually getting to the point where you're in part living off the dividends. You're literally getting money back from the companies for the money that you've put into the business. But going back to the point that we were talking about earlier, David, around flexibility in our companies and our mindset, I think it's worth reiterating that depending on how far away retirement is, buying a dividend-paying company today does not guarantee that it will be a dividend paying company by the time you reach retirement. I'm thinking about businesses that have long histories of paying dividends, GE being a great example. Even more recently, companies like Disney, which had impressive dividend histories that recently got cut as their business changed. Be flexible with your investments too, and just recognize that if you are buying dividend companies as part of the retirement plan, depending on how far away that is, the business you're buying today could be very different than the one that exists when you retire.

David Gardner: It's also true the other side of the coin, Robert, that some companies that don't pay dividends today all of a sudden might as they mature start paying dividends.

Robert Brokamp: Absolutely. Another thing I would like to point out that Justin is doing well and that is as a retiree, you have to decide what to sell. And one way to rebalance your portfolio is sell the things that have become overweight and that's what he's doing. If he says, if a single-stock is getting too big, I'm going to cut back on it. But it could also be asset classes, it could be stocks versus bond versus cash. Could be large cap versus small cap, something like that. Then if you're still working, you do a different strategy, and that is if you have parts of your portfolio that are underweighted, all your future contributions to your IRAs and 401K's go into those asset classes. So it's a great way to strategically manage the flow in and out of your portfolio as a way to rebalance it.

David Gardner: Thank you and thank you both. In fact, rarely do I do ads on this podcast anymore. I used to read, like we all did, used to read for Harry's get a better shave or Rocket Mortgage for a solid year and a half or so.

Robert Brokamp: I think Warby Parker glasses may be up for a little while.

David Gardner: But I'm going to do an ad for us here because both Robert and Emily, you fulfill important functions here at the Fool. I just bet after getting to hear from you for the better part of 20 or 30 minutes, a few people listening at least might be like, how can I get some more of that? Starting with you Robert, what can I sign up for or do at The Motley Fool that will get me in touch with you so I can ask you my complicated algorithmic question?

Robert Brokamp: I'm the lead advisor for The Fool Rule Your Retirement service, which just turned 19 years old.

David Gardner: When I google the phrase rule your retirement, guess what pops up number one on the internet?

Robert Brokamp: Weird Al.

David Gardner: Nope.

Robert Brokamp: Oh, that's too bad.

David Gardner: You and our service, but I like the answer. Just think, not only is it about ruling your retirement, but you rule the internet on that phrase.

Robert Brokamp: I'm very proud, I guess. [laughs] When you sign up for retirement or really any other full-services, you not only get that service, but you also get access to something called Fool Live, which airs every weekday, and I do two shows on that. Both of them, I accept any sort of financial planning, retirement planning.

David Gardner: Love it. Emily?

Emily Flippen: Yes. Well, the flagship service here at The Motley Fool is a great place to start that stock advisor, and David, I work on a team that uses the investing methodology that you put forth for your Rule Breaker stock picking mindset, if i will, to help find great companies for average investors and stock advisor. We have stock picks that range anywhere from companies like Amazon, Google, Apple, to smaller businesses that are more growth-oriented, and unprofitable. So really a little bit of something for everybody in a choose your own adventure if you will, stock picking service.

David Gardner: Thank you, Robert. Thank you, Emily. Emily, I'd be remiss if I didn't ask you. I'm not asking you to pound the table for anything, but what's the stock that's come across your transom recently that you like. You're not here, again, pounding the table for it. It's not the only stock people should buy, but what are you looking at right now?

Emily Flippen: Well, I like to go back to that methodology that you mentioned, which is to make sure your portfolio looks like your best vision for the future. I probably butchered it a little bit, but one business that I think I made some recent strides in that direction is Vertex Pharmaceuticals. This is a large pharmaceutical company that has commercialized treatments for cystic fibrosis. But they recently, over this past weekend, reported some interesting results from their Phase 2 trials for the treatment of Type 1 diabetes. And it's a small group. Only 6 participants in that trial, but two of the six people who are participating are now insulin independent. So the independent monitoring committee recommended that they move to Stage 3 trials, so we'll see if the FDA agrees. But regardless, this is a company that is investing a lot of money and to making steps substantial improvements on treatments for people from Type 1 diabetes all the way to pain management, kidney disease, to cystic fibrosis.

David Gardner: Love it. It is a reminder and this is how we'll close it this week, to always be playing the long game. I think about some of the questions in conversations we've had and we're talking back to 15 years ago or more, which is about the time that Vertex Pharmaceuticals came to Rule Breakers and it came from our colleague, Charly Travers. And today it's an 88 billion-dollar company. Dear listener in case you thought you missed it, you rarely do, if ever miss it. So many of us, I think with that backwards-looking, oh, I didn't have it think. I should have bought it, but I never will now that I didn't back then. But what I appreciate about what you've just done, Emily, is you've reminded us it's all about what comes next. And often, the winners keep on winning. Not every time, but often. So thank you for that fun. Emily, bro, thank you.

Emily Flippen: Thank you.

Robert Brokamp: My Pleasure.

David Gardner: Well, to show notes at close. The first is that next week's podcast is all about financial freedom. Here's the question I have for you, and it's a write-in, i.e. its a mailbag episode next week. It's going to be much better if you take a moment right now just to send me a few sentences of thought. Our email address is [email protected]. I mentioned this last week. This is the last time I'll mention it. But for next week show, here's my question for you; dear fellow Fool and listener, what did you do in the past year to create more financial freedom for yourself or for others? And how do you measure that? One more time, what did you do in the past year to create more financial freedom for yourself or for others? And how do you measure that? Well, that's going to form the bedrock for next week's freedom week. It's Independence Day here in the United States. Financial freedom week for next week's podcast. Now we're recording next week's podcast tomorrow. Meaning send me your reply right away. I would love to hear from you. [email protected] is our address to feature you on my financial freedom show next week. Thank you in advance. My final closing note, one of our authors in August who's already said yes, is Arthur Brooks. 

Many will know Arthur from many past associations. One prominent one of which of course, is that he writes for The Atlantic, their Happiness column. He wrote a wonderful book a few years ago called Love Your Enemies. I first heard of it from a fellow Fool Jason Moore, a longtime listener of this podcast and Fool correspondent. Jason, thank you for that recommendation. I read it in the past year so I could call it my book of the year over the past year or so. It's about the great importance of treating everybody with respect, especially thinking today in the United States of America, people who may not agree with you were told many of us through many different traditions to love our enemies. Brooks's message, his intelligence, his storytelling, all of them will be on display for our authors in August conversation. I'm very excited to welcome Arthur Brooks to this podcast in August and a few others that will reveal over the course of July, but there's some reading for you to get started. Arthur Brooks's 2019 book, Love Your Enemies. In the meantime, for financial freedom, drop me a note and have a lovely week. Fool on.