For those who never had the opportunity to read one of Peter Lynch’s books, the well-know American fund manager, let’s take a peak at his golden rules for success, meant to be of use to the nonprofessional investors, according to Peter Lynch.
Lynch has led the investment fund “Magellan”, of the administrative society “Fidelity” during 1982 – 1992. This fund grew in that period from 50 million dollars to 50 billion dollars, and the annual growth factor was of about 29%. He clearly knew what he was doing, so his words are not to be taken lightly.
He wrote a book : “One Up on Wall Street” and in his book, next to investment strategies and theories, he included some guidelines for the amateur investor, guidelines that over the years brought so many people to success.
1. Investment is fun, exciting but as all things that are not boring, it can get dangerous if you don’t research your actions.
2. You hold an advantage and it is not what you are going to get from Wall Street. It is what you already have. You can even be better than experts if you are using your advantage and invest in companies you know all about. The advantage is essentially your not worrying about your boss or peer pressure and the public scrutinizing your every move. Other advantages that an amateur holds is the relatively smaller amounts to invest which he or she can invest in smaller companies which he discovers and which are not so liquid.
3. If a stock exists, then there’s a company that holds it. You need to know nothing about the stock itself but everything about the company.
4. Often you can’t see why a stock increased when the actual company had fewer sales. If you are looking at just a few months, then you can’t find a pattern. But over years, the pattern is clear. You must be patient and always own successful companies.
6. You must know what stocks you are buying and why you bought them.
7. Don’t go for a long shot even if it seems to be an opportunity. It will most certainly miss.
8. Investing is like children. You don’t make more children than you can take care of, so don’t invest in more than 12 companies overall, and 5 at a time because you won’t be able to track them.
9. Don’t invest when you can’t understand the finances of a company. The greatest losses come from companies that are not solvable.
10. If the market crashes, don’t panic like all the others do. Take this opportunity and buy cheap stocks from the ones who panicked.
11. The more companies you study, the more chances you get to find good ones and companies that are not yet known on Wall Street.
12. If you just invest without studying, you will play the market as if you were paying cards without being allowed to actually see your hand.
It’s good for beginners.
“One up on wall street” – was a great read 🙂 Highly recommended for every one for the wisdom it holds.