NEAL CONAN, host:

This is TALK OF THE NATION. I'm Neal Conan in Washington.

And right now our monthly visit with the Motley Fool. And to kick things off for 2007, we're going to start something new today. Whenever we talk about stocks and bonds, other investments, several of you called to ask how do I get started?

Well, beginning today that's what we're going to do. We're going to create a fantasy portfolio of investments from scratch. And of course we're going to need your help to do it. If you have principles to abide by, recommendations for solid investments, any pitfalls to watch out for, give us a call. Or if you have questions about where to start with a portfolio - research, trends, diversity, let us know.

The number is 800-989-8255, 800-989-TALK. E-mail is talk@NPR.org.

And to help us get started, David Gardner is on the line with us again on Fool headquarters in Alexandria, Virginia. David, welcome back and happy new year.

Mr. DAVID GARDNER (Motley Fool): Happy new year to you as well, Neal.

CONAN: And of course we need to stress again that neither David or I will offer advice on whether to buy or sell any particular stock. This is a fantasy portfolio with imaginary money. I'm going to pick the stocks with advice from you listeners. And since I'm a beginner at this, keep in mind it is all just for fun. This is not meant to be financial advice and will not be a recommendation for or against any investment.

We're going to have to get one of those high-speed radio announcers to read that every week. David…

Mr. GARDNER: You know, it's just good advice anyway. Cause one of our foolish tenets, Neal - and that's foolish with a capital F - is…

CONAN: Think for yourself, think for yourself.

Mr. GARDNER: …I hope that every listener walks away from our segment together doing just that.

CONAN: Well, $10,000 has just imaginarily fell into my imaginary lap from a clear blue sky. Where do I start, David?

Mr. GARDNER: Well, I would first make sure that if I don't already have an account to deposit it into, to open that account. And certainly a lot of listeners will already have a brokerage account. But, Neal, if you didn't I would suggest you sign up for one, make sure that you know…

CONAN: And I don't have a brokerage account. So there's a thousand of them out there. How do I pick them?

Mr. GARDNER: Well, I like to know what I'm going to ask of my brokerage account first. If I'm looking for somebody else to make the decisions on that $10,000 for me, I will probably go with a so-called full-service brokerage account, probably meet my broker, a real human being, somebody that I like and trust. I would probably ask friends for advice - who's doing it for you? Who do you like? It's nice to ask professionals in our lives. The doctors and lawyers in our lives often have made these decisions. And so I would ask around that way.

If on the other hand, Neal, you feel, hey, I can do this, I can do this myself. The Internet enables a lot of us now. Maybe you'd want to go with a so-called discount brokerage account where you'll be paying less. But guess what, if you wake up screaming at 2:00 a.m. in the morning thinking about your stock market portfolio, there won't be somebody on the other end of a phone line probably to talk about you - that with you.

So you have to know thyself when it comes to what your needs would be for the account.

CONAN: Well, since I have a monthly access to a fool and a nation of incredibly intelligent investment advisors to help us out, we're going to go with making my own decisions by myself. So I'll take responsibility for this, David. Once we've decided on that, we put the money into a brokerage account. What happens next?

Mr. GARDNER: Well, I would start asking myself how many investments are appropriate for me and my money. And since we're talking about $10,000, Neal, you could talk to five different advisors and they would give you five different ideas here. But the similarity is diversify.

And I would say that out of that, I would like to think that you'd start with, let's say, ten stocks, $1,000 in each stock. That feels like a manageable number to me.

CONAN: I was thinking about Charlie's Hope in the sixth at Aqueduct. No, that's not probably a wise investment.

Mr. GARDNER: Well, listen, if you have a tip for us, let us know. I mean maybe I should be thinking about the sixth at Aqueduct.

CONAN: So we're thinking about maybe ten purchases in all at about $1,000. When you talk about diversity, is simply just having ten different stocks enough protection? Because you can lose money, even imaginary money, in the stock market.

Mr. GARDNER: Yes. We're talking about here a stock market portfolio. I'm going to assume at National Public Radio maybe you have a 401k or a 403b plan. A lot of us do in our lives. So what I'm simulating here is that you have - you're opening a new account where you want to get started with stocks. The truth is here at the Motley Fool, we favor for a lot of our customers and subscribers and listeners, owning an index fund and making just the market itself.

When you own the index fund, you own kind of all the stocks on the market, and you end up with the market average. And that does pretty well over time if you're patient. And that's the way a lot of us are invested in our retirement plans at work.

So we're assuming here, Neal, that you want to get started with the stock market, and so - and in general…

NEAL: That's what I was sort of interested in.

Mr. GARDNER: Yeah. And I like kind of a stock market portfolio of about 20 stocks or so. So I like to think - this $10,000, I like $1,000 per stock, but I'm going to hope that you can save and add to that over time.

CONAN: All right. Well, let's see if we can get some advice for listeners. This is Chris, Chris with us from Winfield, Illinois. Chris, are you…

CHRIS (Caller): Can you hear me?

CONAN: Yes, you're on the air. Go ahead, Chris.

CHRIS: Thank you. I just wanted to make a comment. I was listening to the introduction to the program, and I thought that - (unintelligible) to do before they get into the investment game is to realize what objectives they're shooting for, at least define it for themselves and then go after an investment strategy that would achieve those objectives within a limited span of time.

CONAN: Well, for example, if I was in my mid-20s and not looking forward to retirement anytime soon, my objective might be a regular, slow, steady growth, something like that. Whereas as an old geezer that I am, I might be interested in something a little bit more speculative. Is that what you're talking about, Chris?

CHRIS: Something like that. I think you could possibly - that's a good example. I think you could also possibly mix it up a little and look at certain investments which probably will yield faster returns for you versus some which are more long-term and stable investments that hold down the portfolio from any sort of risk that you might undertake because of investing in volatile stocks.

CONAN: David Gardner, what do you think?

Mr. GARDNER: It's good, rational thinking, and we probably don't have enough of that in our world today. And I think absolutely you should know your time horizon more than anything. Are you investing for three years or 30 years? And then you also should know, number two, your own tolerance for risk. Are you somebody who enjoys diving into the deep end early on? Do you feel confident? Is making a mistake and maybe losing money your first year, even, is that okay?

For some of us, it's simply not acceptable. And it might be our own mentality, or it might be our real-life situation. So it is very sound thinking to - ahead of time - decide why you're doing what you're doing, and then invest accordingly.

CONAN: Hm. Okay. Chris, by the way, before we let you go - as long as we're identifying you as a sound thinker - if you were going to recommend a stock, what would it be?

CHRIS: I don't want to, like most people on radio or TV, I don't want to give you the name of a stock that I would recommend.

CONAN: For fear that we would drive up the price.

(Soundbite of laughter)

CHRIS: (Unintelligible) reason. Maybe my picks are not so good at all. But what I would say is in case somebody does want to invest in a particular stock, then they should look at a few parameters or variables that might help them understand if the investment is worth risking their money with.

One such thought process would be if I pick a stock, am I picking a stock in an industry that is going to grow in the future? Am I picking a company that has demonstrated good past patterns of growth in that specific industry? Where do they stand with respect to their competitors, and what is the nature of this company that you're investing in?

What is its management practice? Are they risk-takers, or are they simply people who maintain a status quo to provide dividends to investors? So all of those variables have to be taken into account before you can go out and pick a stock. And I think it is quite a difficult task for most individuals, including myself, to pick stocks with all those variables in mind.

CONAN: All right. Well, Chris, thanks for that advice. I'll go home and crawl under the sheets and stay there for the rest of the winter.

(Soundbite of laughter)

CONAN: Bye-bye, Chris.

CHRIS: That might be a better return on your money.

CONAN: It might be a better return on the investment. That's absolutely right.

(Soundbite of laughter)

CONAN: Chris, thanks very much. Here's some e-mail we got. Arnold recommends Saradyne. More defense and military spending will occur, he says. Defense Secretary Gates has recommended an increase of soldiers for the Army and Marines, Iran - and it goes on through sort of the apocalypse portfolio suggestion. So we'll keep that one on one side.

Mike from Madison, Wisconsin says I think you should consider socially responsible investing for your fantasy investment. Companies leading the way to a sustainable society are positioned to grow exponentially as our global values shift in a socially responsible way. As our entire economy begins to take on environmental impact seriously, companies that focus on clean and green technologies and policies are good choices.

My wife and I invest in a mutual fund called Portfolio 21, which has returns this year of over 24 percent. Of course, that's not a guarantee of what they're going to do next year. A good place to start researching for social responsible funds, and he has a suggestion for that.

And here's one from Alec. Suggest the portfolio include a small basket of stock in firms located in India. It would be doubly diversifying, because the Indian economy is expanding, largely independently of the U.S. economy.

Is that possible to do with just a brokerage account with a, you know, a Wall Street firm?

Mr. GARDNER: I'm happy to say that it is, Neal. And I would like to add - I'm not going to give you a specific stock in mind, but I'm going to encourage you to look at your own habits and practices as a person. I think one - I think I'm playing off of - I'm riffing off of Chris' call a little bit, but observing thyself often leads us - for me personally, it's been beneficial to some of our best investment ideas. Because while somebody might tell you a good stock, I really think that you're going to learn more, and I do believe you will do better, if you are buying stock in companies that you buy from whose products and services you approve of.

Often, that - for your own definition - will be socially responsible, right? Because the things that you're buying and doing are probably according with your own beliefs, and so often - I think Warren Buffett has called it our circle of competence. And if you keep your money invested within your own circle of competence, boy, are you going to do a lot better. So I can't speak to Saradyne, although it's a well thought of stock. But I will - to circle back to your question about India, there are a number of companies today that are significant players in India that you can buy just on our NASDAQ or New York Stock Exchange, because they list their shares in the U.S.

CONAN: Okay. Well, we're talking with David Gardner of The Motley Fool. We're starting our investment portfolio with 10,000 imaginary dollars. If you'd like to help us make our choices, 800-989-8255. E-mail is talk@npr.org. And this is TALK OF THE NATION coming to you from NPR News.

An e-mail from Patrick in San Francisco. My stock suggestion is Anheuser-Busch. Besides being the world's largest beer maker, people will always be drinking beer. This is even more true during economic downturns. Therefore, as the economy gets worse and people lose their jobs, they will drink more beer. Stock goes up. There's another one for our apocalypse file.

Mr. GARDNER: You know, in fact, there are lots of reasons, probably, that one could think about beer companies. But Bud has been a good long-term stock, and that reminds me to say that, in general, in my investment experience - which is admittedly not 50 years, but I have been investing for 22 years - and I think for the most part, Neal, the winners keep on winning in this world.

So I like to know where a stock that I'm investing in has already been. I'm not one of those who believe what goes up must come down. Often in the stock market, the truth is what goes up keeps going, especially if you're patient and let it go. And just to point out a stock - FedEx would be an example of that.

All of us have seen FedEx, their witty commercials 30 years ago. They started to come on to the scene. If it absolutely, positively has to be there overnight, etc. But here we are three decades later, and people who just patiently held that stock have done really well.

So that's an example - to me, anyway - of staying focused on something that you understand and letting it grow. And at the risk of throwing in too many lessons at once, I would just jump on my own statement and say try not to sell too soon. Because if I try to identify one thing that I've learned from Motley Fool listeners over the years, it's that a lot of us sell too soon and trade too often.

CONAN: Well, we're going to have to make some decisions here. We're going to have to make some decisions here. Well, Saradyne, a recommendation from a listener is certainly good enough for me.

You say your circle of interest. I've always been a fan of Apple products. They are just about to announce this new iPhone. I'm sure I've blown the timing of the market that responded to that, but I love their products. I think they're great.

Mr. GARDNER: It's an amazing company, and Apple has such an interesting history, and a lot of us have seen it and watched it. And, you know, for the longest time, it was a company - everyone loved their product, but it was just a computer company, and they lost a lot of market share. But all of a sudden, the resurgence of Steve Jobs - I think that's a really neat one. I wish I'd owned Apple over the years.

CONAN: I'm going to invest $1,000 in another company whose products I know something about an enjoy, and that is Marvel.

Mr. GARDNER: Well, I'm glad to hear that. That's actually one I do own in real life, full disclosure. We'll see how it does in the future. It's done awfully well in the last five years. I do like to talk about my winners, but Marvel is an interesting company, Neal, because they're shifting their business model. And a lot of us, as we start to get a little more interested in the stock market, should be asking of our companies: How do they make money?

And you know, Marvel has done pretty well selling toys. In fact, when "Spiderman 2" comes out - it's not so much that Marvel's making a lot of money off of owning Spiderman the character and off of Sony Pictures' movie, but rather, it's been the toy sales.

But Marvel's taking a little risk here. In 2008, it's shifting to financing its own movies and then taking the full risk or benefit of how they do. And that'll start with "Iron Man," I think with Robert Downey, Jr. and now Gwyneth Paltrow in 2008. So that'll be interesting to watch. And it's riskier, but it could be a home run.

CONAN: And that new one, of course, will be "Spiderman 3." You misspoke. But anyway. We've got to make some decisions. Patrick, we'll take his $1,000 offer on Anheuser-Busch. You talked about FedEx. All right, why not?

Jonathan writes via e-mail: Buy stock in ConocoPhillips. The dividends are huge. All right. Jonathan in Sacramento says ConocoPhillips. So energy sector, is that a good idea?

Mr. GARDNER: You know, energy sector has been a great idea over the last two years. The last four months or so, it's been depressed. As gas prices came down, the stocks - a lot of them have sold off about 20 percent. It might be a timely buy.

CONAN: All right. So we've got six items already, and we need four more. So where do we go to look?

Mr. GARDNER: Well, I think that there are lots of resources on the Internet today. I first want to remind you to look inside your own heart or in your own fridge or how about on your Web browser? Where are your favorite places that you're visiting? That's led me to some of my best investments.

But we do have a service called Motley Fool CAPS, which is an interesting revolutionary service in that it's rating all stocks across the market relative to each other. And so you can look up almost any ticker and at least get a second opinion. And what's driving the ratings are people like you and me rating them, and then how we do.

Those who excel affect the stock rating. So when Neal Conan - who's doing really well - comes along and makes a new pronouncement, let's say, then that'll jump our stock rating higher and make it look more favorable because of your good past performance, etc.

So there might be - as a research tool, it's a free place you could go and take a look and hunt for some extra winners.

CONAN: What we're going to do is we're going to make these six investments that we just described. We're going to hang on to the rest of that money for a while, while we look over the other stocks and make prudent decisions or absolutely silly ones. Again, this is all imaginary money. And we're going to be able to follow what's going on.

You can follow it, too, by going onto our Web site at npr.org. And we're, of course, TALK OF THE NATION. Go to TALK OF THE NATION page, and you'll be able to follow this month by month. And maybe next month, we'll find out how we're doing on our first six stocks and maybe make investments in four more. So David Gardner of The Motley Fool, as always, thanks very much for being with us today.

Mr. GARDNER: A lot of fun, Neal. Good luck.

CONAN: Thank you. David Gardner is co-founder of The Motley Fool. He joined us from Fool Global Headquarters in Alexandria, Virginia. We'll talk with him again next month, see how we're doing on our six stocks, and maybe we'll try four more. I'm Neal Conan, this is NPR News in Washington.

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