Below, David Gardner shares five key insights from his new book, Rule Breaker Investing: How to Pick the Best Stocks of the Future and Build Lasting Wealth.
David is the co-founder of The Motley Fool and host of the Rule Breaker Investing podcast. He has spent over 30 years identifying stocks like Amazon, Netflix, Nvidia, and Tesla before they became household names.
What’s the big idea?
The real secret to building lasting wealth on the stock market is breaking the old investing rules. Rule Breaker Investing teaches how to craft a purpose-driven portfolio, manage investments, and even master time management for a smarter, happier, richer investment journey.
1. Trading is the antithesis of investing.
Imagine you’re a sports fan wearing your favorite team’s jersey. Do you switch jerseys when your team loses a game? Of course not. You stay loyal. Yet investors do exactly that. They jump from stock to stock, chasing short-term gains and trying to time the market. What they are doing is trading, not investing.
Investing means putting on the jersey and keeping it on through good seasons and bad. It means believing in the long-term potential of great companies and letting compounding growth do its magic. Short-term trading fuels anxiety and generates costs. Real investing builds wealth patiently and confidently over time.
2. The joy of investment gains is infinite.
Behavioral science tells us that humans naturally feel the pain of loss about three times more than they feel the joy of gain. But in investing, this natural wiring holds us back. The most you can lose on a bad investment is 100 percent, but what’s the most you can gain?
“The potential gains are essentially unlimited.”
Well, Netflix rose over 600 times in value since my first recommendation, and Amazon more than a thousand times in value. The potential gains are essentially unlimited. When you understand this, you realize the emotional cost of missing out far exceeds the temporary pain of a loss. To succeed as investors, we must rewire our emotional relationship with risk.
3. The ‘snap’ test.
Imagine that you’re considering buying a specific stock, and then that company disappears overnight. Would anyone notice? Would anyone genuinely care? If the answer is yes, then that company passes the snap test. This simple, yet powerful evaluation helps identify truly great businesses: companies that deeply matter to their communities.
If a business passes this test, it is likely to hold significant long-term potential value. Starbucks, for example, isn’t just selling coffee. It’s woven into people’s daily lives. Ask yourself, Would anyone notice? Would anyone really care the day after that company disappeared? This is how to naturally gravitate toward stocks that are poised to outperform.
4. Buy in thirds to ease anxiety.
People often worry about getting the timing right when investing. To remedy this, buy in thirds. Say you want to invest $3,000 in a promising stock, but you worry it might fall right after you buy it. This has happened many times to me. Instead of waiting indefinitely, invest a thousand dollars out of your $3000 today, then another thousand next month, and a final $1,000 the month after that.
“If prices fluctuate, it helps you build your portfolio methodically.”
This simple method gets you into the market immediately while reducing regret. If prices fluctuate, it helps you build your portfolio methodically. Remove the paralysis that comes with trying to find that perfect moment to buy by buying in thirds.
5. What wins in investing, wins in business, wins in life.
The same core traits that drive investing success also fuel success in business and life: optimism, patience, independent thinking, and long-term perspective. Consider the transformative success of Amazon, whose early days were filled with skepticism and doubt—especially by market onlookers and industry viewers. Yet Amazon has flourished due to vision and resilience.
Whether you’re managing a portfolio, running your own small business, or navigating life’s challenges, embracing these traits helps you thrive. When you invest while embodying these principles, your own portfolio not only grows, but you grow personally and professionally too.
Enjoy our full library of Book Bites—read by the authors!—in the Next Big Idea App:
