All jesting aside, these fools are optimists

Since its founding in 1993, The Motley Fool has become one of the most successful multimedia financial-education firms.

Created by two brothers, David and Tom Gardner, the enterprise, based in Alexandria, Va., has included a popular financial website (www.fool.com), a number of books, a syndicated newspaper column, and a weekly program carried on National Public Radio.

Often sporting jester hats, sometimes humorous in their analysis, definitely iconoclastic in outlook, the Gardners believe that investors should be well informed and financially literate – heeding the old cliché that a fool and his money are soon parted.

So when it comes to your finances, they are telling investors, be a wise fool.

Earlier this month, the Gardner brothers visited New York to promote their latest book, "What To Do With Your Money Now." They shared their views on the stock market – and the steps investors might take to preserve their assets in the current turbulent setting.

Is this an usually severe stock-market downturn, or a more typical downturn – with a correction to the upside finally under way?

Tom: For the economy, this is not an unusually painful downturn. For the stock market, this is a very painful period, particularly for those people who are invested in the Nasdaq market. Even the S&P 500 is down 20 percent over the past year. One of the reasons we sat down and wrote the book is that there are 75 million baby boomers who are within 10 to 20 years of their retirement. They are going to have to work longer and plan better, starting now, if they are going to be on top of retiring.

David: Many people only began investing in the past five years. This is their first time being exposed to a bear market. So we felt it was time to write a book that said, "Hey, our stock portfolio got cut down, too. That's the way it works. Don't sell at the bottom. Don't overreact to short-term events."

What's your outlook for the months ahead?

Tom: The market has come back from Sept. 11, but if you look at this year from Jan. 1, we're still down about 10 percent. It's very difficult for us to make any estimate based on the short term. But investors should look long term. Take an interest in what Warren Buffet is saying. He's pegging his pension fund to 6.5 percent growth per year. Maybe we will be in an environment where your real rate of return will be lower than in the 1990s, say, about 6.5 percent, not as high as 8 or 9 percent, as it has been historically.

So its sounds like careful selectivity of investments will be the key to financial gains in the period ahead.

David: I think that's a good way of always thinking about the stock market. Think of owning the stock market through a good index fund; if not, then think about carefully selected individual stocks. Even in a bear market, there are companies that do well. Talbots, the woman's clothing store, for example, has doubled in value over the past three years.

Which do you like better now? Stocks, bonds, a blend?

David: We're big fans of the stock market. People should own a total stock-market [index] fund. The investors are going to pay one-sixth per year in expenses for what they would pay for a professionally managed fund and, based on history, they will likely do better than the majority of those funds. Those who go out and buy individual stocks [will] want to have some recession-proof companies in their portfolios, whether its a supermarket stock or a company like [warehouse club] Costco, where people are going to find substantial price discounts.

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