“The best book to start investing, but also for any professional. Opportunities are everywhere. Peter Lynch shows you how you can use them using what you already know.” – Florian, Co-Founder
Timeless wisdom! 😍
The 10 key lessons and principles that Peter Lynch articulated in his book and speeches are absolutely entertaining and authentic from someone who has lived through bull and bear cycles with a lot of “skin in the game”.
1. Know what you own
For Lynch, the most important rule of investing is to know and understand the company you own.
In a 1997 speech, Lynch said: “If you can’t explain to an 11-year-old in two minutes why you own a stock, then you shouldn’t own it”.
The key idea here is to understand the business behind the share price, as the performance of the business determines the long-term share price performance.
2. Don’t try to predict the economy
Lynch explained the bottom-up approach he takes to investing. He invests based on company and industry analysis – not on macroeconomic trends or changes such as interest rates.
Even if you can predict the economic future, Lynch says, you still have to correctly predict the sectors that would benefit from that future and then predict the companies that would do well in such a scenario.
No one, Lynch said, could do this consistently.
Lynch said, “If you spend 13 minutes a year on economics, you’ve wasted 10 minutes.”
3. Be patient
For Lynch, investing is a marathon, not a sprint.
You won’t miss out if you don’t buy now, Lynch says, pointing to the example of Walmart, which you could have bought a decade after it listed and still made 30 times your money.
4. There are great stocks everywhere
Lynch advises investors to avoid bias toward certain industries or companies unless they don’t understand how the company works, as described in Rule 1.
There is money to be made investing in any type of company – especially those that are considered “boring” – because they are easy to understand.
5. When to sell shares
According to Lynch, investors should write down as simply as possible the reasons why they bought a stock, and when those reasons no longer apply, they should consider selling.
Lynch believes that investors should never sell because of short-term market fluctuations – selling should only be done when the fundamentals of the company change.
6. Stocks can always go lower
“Just because a stock has fallen doesn’t mean it can’t go lower… Just because it has fallen doesn’t mean it will recover.”
7. Stocks can always go up
The fact that a stock has gone up is not in itself a reason to sell – you should only sell if the company’s fundamentals change.
Just because a stock has gone up doesn’t mean it has to go down.
8. A fall in the stock price does not mean you are wrong
Lynch advises investors to ignore short-term price fluctuations and focus instead on the company’s fundamentals, as these determine the share price in the long term.
The long-term performance of the stock price proves whether your investment thesis is right or wrong.
9. You can always lose what you invest
When investing, many people forget that you can always lose what you’ve invested, even if a stock is cheap.
If you invest 10,000 dollars in a company at 10 dollars per share or 10,000 dollars in a company at 50 dollars per share, you will lose 10,000 dollars in both cases if the share price falls to zero.
10. The person who turns over the most stones wins
Lynch says: “If you look at ten companies, you’ll find one that’s mispriced. If you look at 20, you’ll find two… the one that turns over the most stones wins.”
Simply put, the investor who studies more companies will find more investment opportunities.
Peter Lynch Lecture on the Stock Market
arvy’s takeaway: As long as you invest for the long term, your portfolio can reward you. This timeless advice has made One Up on Wall Street a #1 bestseller and a classic book of investment know-how.
One Up on Wall Street
English Version: Amazon.com
German Version: Amazon.com
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