Life advice from a Motley Fool co-founder

The Motley Fool is currently holding its annual company conference.

a woman holds a cup to her ear and leans in with a wide mouthed expression on her face as though she is listening to interesting and perhaps surprising information.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

I'm writing this from a hotel room in Maryland, USA, where The Motley Fool is holding its annual company conference known as Foolapalooza.

(Don't worry – we're also keeping a close eye on the market and the companies we've recommended to our members, while we're here, and a few of our team remain at home, minding the fort, and making sure we don't miss anything!)

I have to be quick — it's the lunch break, and I'm expected back in a minute.

What you might know about The Motley Fool is that two brothers, David and Tom Gardner are our co-chairmen and co-founders. What you may not know is that we have a third co-founder, Erik Rydholm, who went on to be a stunningly successful sports television producer.

At the conference earlier today, all three men were up on stage, telling stories from The Motley Fool's history. Not only are they great stories, but our company has grown a lot in the past few years, and it's important that new recruits are grounded in that history.

But why am I telling you all this?

Because, at the end of their time on stage, the session's host asked them to reflect on advice they'd give their younger selves. All three men's responses were excellent, but I wanted to share Erik's in particular.

His advice was captured in three words: 'Be directionally correct'.

I think it is wonderful life advice. It's great career advice. And it's terrific advice for investors.

I'll let you draw your own conclusions on the first two, but I do want to amplify how I think the latter point applies for us.

See, a lot of investors are (understandably) obsessed with not making mistakes. With trying to make sure they're right, every single time.

Don't get me wrong: those are worthy aims. And, if I could take out my failures, without penalty, I would.

But of course, as Yogi Berra once said, 'predictions are hard… especially about the future'.

Now, contrast that with being 'directionally correct'.

What I took from Erik's words – and this is my interpretation, not his – is that if you do most of the right things, as often as you can, then you'll end up in roughly the right place.

Now, if that sounds like I'm hedging, I'm not. But if that sounds like I'm allowing for the reality of imperfect uncertainty, then you're 'picking up what I'm laying down' (as the kids almost certainly don't say any more).

You can't expect to be right with every single investment. Or, if you are, that probably means you're only holding cash and you're in a constant fight with inflation just to keep your purchasing power roughly equal. That can make being 'right' a very expensive exercise!

But if you regularly do the things that are most likely to correlate with success, over time, then you're probably 'directionally correct'.

Not 'perfectly accurate'. Not 'guaranteed not to lose'. And not 'sure to avoid volatility'.

But 'directionally correct'.

That is, you're doing the right things, and heading the right way… toward a ballpark result that, if you stick with the process, is likely to be the one you seek and deserve.

For investors, I reckon that's buying quality companies.

It's looking for businesses with bright futures.

It's paying a good price.

It's being diversified.

It's not using borrowed money.

It's not speculating, or making silly bets.

It's adding money regularly.

It's not sweating the small stuff, or the short-term.

It's playing the long game. (Which, coincidentally but not surprisingly, was David Gardner's advice to his younger self!).

I reckon if you invest accordingly, you stand a very, very good chance of being very, very happy with the outcome.

Now, you do have to stick with it.

You can't just pay it lip service, then diverge from the path.

But if you can embrace it, and see it through, then I think you'll find out that being 'directionally correct' is a great way to think about – and implement – your investment strategy.

Now, if you'll excuse me, it's time to head back to the conference!

Fool on!

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Motley Fool Take Stock

A young boy laughs with his grandpa as he puts a fishing net over his head.
Motley Fool Take Stock

An investing lesson – sort of – well learned

Sometimes, discretion is the better part of valour.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Motley Fool Take Stock

An 'all-time high' investing plan

With the ASX near all-time highs, what's an investor to do?

Read more »

A man leans forward over his phone in his hands with a satisfied smirk on his face although he has just learned something pleasing or received some satisfying news.
Motley Fool Take Stock

How should investors respond to US rate cuts?

It was a big cut. How should investors respond?

Read more »

Happy young couple saving money in piggy bank.
Motley Fool Take Stock

The three things that drive your investment returns

Bottom line? Kenny did a great job. But Penny did better.

Read more »

a woman puts her fingers in her ears with a pained expression on her face with her eyes closed as though trying to block hearing bad news or an unpleasant loud noise.
Motley Fool Take Stock

Enough with the corporate spin!

The spin is making me dizzy.

Read more »

A male investor sits at his desk looking at his laptop screen with his hand to his chin pondering whether to buy Origin shares
Motley Fool Take Stock

The recession(s) we're already having

The headlines hide the real story.

Read more »

a couple consider the advice from a man with documents laid out on a table and the man holding a tablet in his hand.
Motley Fool Take Stock

Here's why you're paying too much for financial advice

Advice is too expensive. Here's why...

Read more »

A sunset scene though the fingers of two hands, indicating the bigger picture
Motley Fool Take Stock

The secret of stock market success in a single picture

It’s the most wonderful time of the year.

Read more »