Fool’s Gardner on Active Versus Passive Investing

In a recent interview with WealthTrack’s Consuelo Mack, Motley Fool’s Tom Gardner shares insights regarding active versus passive investing and where he sees market opportunities.

Tom Gardner, who’s mission through his Motley Fool multi-media network of financial services is to “help the world invest better.” He asserts his belief that index investing is the best first choice for many investors, but not because it’s impossible to be successful through active investing.

Active investing, he explains, is a non-starter for many people because they aren’t interested in the process, in getting up the learning curve on companies. For these investors, he argues, low-cost index investing is a good move.

As part of his active investment process, Gardner gets under the hood of companies, gravitating toward entrepreneurial-led businesses that reflect an ownership mentality. Most founders, he says, have “long since made enough money,” so their passion for these businesses keeps them engaged. He also focuses on corporate culture and how employees feel about working for the company.

Gardner’s preferred holding period for stocks is typically a minimum of 5 years, but he aims for a longer time frame (10 to 15-years). Human nature, Gardner says, is to suffer the pain of loss three times as deeply as the joy of gain. But the “beauty of losses,” says Gardner, is that every day they lose, they become a less significant part of the portfolio.

Through investing, Gardner says, “I’m trying to learn more about the world.”