WHERE FOOLS CASH IN; BROTHERS' MISSION TO SIMPLIFY WORLD OF STOCK INVESTING.

Byline: Deborah Adamson Daily News Staff Writer

Call them Fools, but please don't call them fools.

David and Tom Gardner, founders of The Motley Fool online investors forum, based in Alexandria, Va., are not imbeciles. But they are fools, in the spirit of the Elizabethan jester, regaling kings' courts with all-too-candid humor.

``The fool was able to tell the truth to the king without having his head lopped off. He made jokes; that's how he got away with it,'' said 31-year-old David Gardner, the elder of the two brothers. ``He fought conventional wisdom. . . . There are a lot of these applications to our financial industry today.''

He should know. The Brothers Fool have built quite an empire on their personal finance advice, creating hugely successful Web sites and books that cater to individual investors.

Their America Online pages and Web site - www.motleyfool.com - get about a million hits a day. People discuss investments on scores of Fool-run message boards and read tips from the Fool staff. This grass-roots approach forms the core of the Fools' goal of demystifying the world of personal finance.

Their investment mantra: Anyone can do it.

The brothers have written two books and a workbook. They recently concluded a promotional tour for ``You Have More Than You Think,'' their second book.

Their lively personalities permeate the book, as does their easy-to-grasp investment advice.

One tip: Finding a stock to buy is as simple as opening the refrigerator.

``Close your eyes and walk up to your fridge, pull out a product and see who makes it,'' advised the elder Gardner. ``Chances are it's in a lot of other fridges. Campbell Soup has been a great company.''

``You put your soup cans in the fridge?'' interrupted Tom Gardner, 29.

``Actually, I keep in the fridge my Lady Godiva's chocolates, which are also made by Campbell Soup,'' rejoined David Gardner.

The Gardners' success is a lesson in contradictions. For one, they are Fools dispensing advise that is frequently contradictory to the ``wise,'' as they mockingly call mainstream financiers.

``If anyone shows up in a suit at work, we joke, ``Hey, are you going for a job interview?' '' said Motley Fool spokesman Chris Hill.

Motley Fool began in July 1993 as a humble newsletter printed out of David Gardner's home. He had tired of his financial writing job and, with brother Tom and a third partner, decided to launch a financial publication. At the time, the younger Gardner was in graduate school at the University of Montana.

In November 1993, in their e-mails on AOL to each other, Tom Gardner said he planned to drop AOL since he could get free Internet access through school.

Next came an afterthought that would forever change their lives.

``The final night, just before he was going to drop off, he went into the personal finance area and just started putting up notes about the Motley Fool,'' recounted David Gardner. ``This was unbeknown to me.''

``One note. I just put up one note,'' corrected his brother.

Tom Gardner offered to give away Motley Fool newsletters for free. The next day, they got three phone calls from Maine, Texas and Minnesota.

Seeing an opportunity, the brothers put up a message board on AOL offering to answer any investment questions - with a caveat that they weren't experts and would appreciate reciprocal advice as well.

By February 1994, it became the most popular personal finance site on AOL. In August 1994, the Motley Fool forum became an official fixture on the nation's leading online service.

Today, Motley Fool Inc. employs 100 people nationwide and continues to grow.

It's an impressive success story, considering the two don't have any formal investment training. They were, however, exposed to the stock market at a young age.

``Our dad made it fun,'' said Tom Gardner. ``As teens, we sat down with Value Line. In supermarkets, he would point to products whose stock we owned.''

Their father's interest in investing did not stem from his job. He was neither a broker nor financial planner. Rather, he was a lawyer for the Bank of Tokyo and the Federal Reserve, Tom Gardner said.

His brother immediately disagreed. ``He was not employed by the Bank of Tokyo. He did business with the Bank of Tokyo.''

There was a slight pause. Then David Gardner quipped: ``He's not our dad, OK? This was all a mistake. We're not brothers.''

Whatever their father actually did for a living, one of his lessons is crystal clear: Invest in what you know.

A repackaged Peter Lynch philosophy? Perhaps. But Tom Gardner says the Fools have refined the strategy that made Lynch's Magellan mutual fund the largest in the nation.

``Lynch focuses on buying what you know, which for some people can be the buggy whip right before the automobile came along,'' he said. ``You should buy what everybody knows, buy what everyone is using. If you invest in companies everybody knows, they've been incredibly successful to get there. They've done a great job of marketing themselves, whether it's Wrigley's gum or Nike.

``That's a great starting point,'' he added.

The Gardners espouse a three-tier investment structure: The ``Obviously Greats,'' ``Foolish Four'' and ``What You Are.''

The ``Obviously Greats'' are blue chip companies, household behemoths such as Microsoft. The ``Foolish Four'' are the highest-yielding and lowest priced among the 30 companies charted in the Dow Jones industrial average. ``What You Are'' reflects companies that cater to your interests, whether that is computer graphics or refrigerated soup.

The percentage to be invested among the three categories would vary according to an investor's investment goals, expertise and available time for research.

The brothers emphasize that their strategy is a guide, not a mandate.

``There are so many roads to investing success,'' Tom Gardner said. ``There is no one way.''

Fools and their money: not soon parted:

The Gardner brothers have built a successful business on the back of their investment advice. Still, they insist it's less important to follow one investment technique then it is just to get started.

Here are the Gardner brothers' responses to the typical excuses people make for not investing.

I don't have any money right now.

Answer: How about saving $1 a day? Put it in an index fund at the end of the year and do that for 50 years.

The average stock market return is 11 percent. That leaves you with $600,000 at the end of half a century.

I'm too busy.

Answer: Again, start by investing in an index fund such as the Vanguard Index Trust 500 Portfolio (1-800-860-8394 for a prospectus). Index funds buy stocks that comprise a particular index such as the Standard & Poor's 500. Since the fund is managed by computer, expenses are lower than an actively managed fund.

Why an index fund specifically and not any randomly chosen fund? Because index funds beat 91 percent of all mutual fund managers, the Gardners say.

Eventually, add individual stocks, starting with well-known household names. Gradually become more aggressive by adding small-cap stocks.

It's too difficult to learn.

Answer: It's easy to invest in an index fund and buying individual stocks is not as difficult as one might think. The sooner you start investing, the better off you are because your money would compound.

But stay away from penny stocks, because they are thinly traded. These companies are not required to disclose their financial condition to the Securities and Exchange Commission. Invest in stocks that are listed in the local paper.

It's too risky.

Answer: There's greater volatility in the short term, but over the long term, the risk is diminished. The stock market, on average, appreciates, whereas money spent at a casino or in a lottery doesn't.

Will the stock market go up forever? It tracks business growth, so the question is whether American companies will stop growing. The only thing that would cause a breakdown of American firms would be extraneous factors so terrible that worrying about your portfolio is the last thing you'd do.

However, there are flat periods in the stock market. Continue adding to your portfolio during those times. You'll be buying at the low end and dollar-cost averaging.

Also, diversifying a portfolio is wise. Don't rush out and buy foreign stocks but invest in U.S. firms with extensive business abroad, such as Coca-Cola.

It's boring.

Answer: If you invest in things that you know, it's really fun. If you drink coffee at Starbucks and invest in the company as well, it's like cheering for a sports team, but in the end you'll actually reap a financial benefit.

CAPTION(S):

Photo, 2 Boxes

PHOTO (Color) Brothers David, left, and Tom Gardner are the Motley Fools of personal investment. Their mantra: Anyone can do it.

Tina Gerson/Daily News

BOX: (1) Foolish prattle

(2) Fools and their money: not soon parted (see text)