Peter Lynch is one of the greatest investors of all time. During his 13 years of running the Magellan Fund, his annualised return was 29.2%, more than 2x the S&P 500's return. This thread go through Peter Lynch's key lessons for all investors.
Let's get started!👇👇
Let's get started!👇👇
1. Know what you own
The single most important thing in investing is know what you own. Peter famously said that you should be able to explain your stock holding in 2 minutes or less to a 10 year old kid. If you don't know what you own, don't buy it.
The single most important thing in investing is know what you own. Peter famously said that you should be able to explain your stock holding in 2 minutes or less to a 10 year old kid. If you don't know what you own, don't buy it.
When people don't know about the stock, and the stock goes down, people don't know what to do about it (Peter famously said that these investors may flip a coin to decide whether they should sell). Don't be that guy who flips the coin.
2. Be careful with investing
People are often careful with any of their purchase decisions. However, when they hear a random tip about a stock on the bus (or nowadays, fb, reddit, twitter), they go on to buy that stock with half their savings.
People are often careful with any of their purchase decisions. However, when they hear a random tip about a stock on the bus (or nowadays, fb, reddit, twitter), they go on to buy that stock with half their savings.
Don't do that! Do your due diligence before you buy any stocks and know what you own!
3. Don't waste your edge
In Peter's word, everyone has their edge, but they throw their edges away. Every investor likely know more about the industry that they are in better than institutional investors. Use that knowledge to your advantage!
In Peter's word, everyone has their edge, but they throw their edges away. Every investor likely know more about the industry that they are in better than institutional investors. Use that knowledge to your advantage!
4. Investing is not gambling
There is always a company behind a stock, and a stock is not a lottery ticket. Never buy a stock randomly and just 'hope' that it will go up! Buy the 'company' instead of the stock.
There is always a company behind a stock, and a stock is not a lottery ticket. Never buy a stock randomly and just 'hope' that it will go up! Buy the 'company' instead of the stock.
5. Correction & Bear Market
The history tells us that the market always goes through correction and bear market, however no one can predict the market (In Peter's words: they can only predict the market after they tried predicting it for 50 times)
The history tells us that the market always goes through correction and bear market, however no one can predict the market (In Peter's words: they can only predict the market after they tried predicting it for 50 times)
6. Prediction is a waste of time
No one can predict the future. Even the FED cannot predict the interest rate three years out, why bother and worry about economic predictions? Focus on the facts instead of future predictions made by 'experts'.
No one can predict the future. Even the FED cannot predict the interest rate three years out, why bother and worry about economic predictions? Focus on the facts instead of future predictions made by 'experts'.
7. Take advantage of volatility
Volatility is a great opportunity for people who understands the companies that they hold. If you do not understand what you hold, you will panic, but if you do understand, you will be able to buy your favourite company at a discount price!
Volatility is a great opportunity for people who understands the companies that they hold. If you do not understand what you hold, you will panic, but if you do understand, you will be able to buy your favourite company at a discount price!
8. No need to rush
You have plenty of time to invest. Peter said that even if you invest in Walmart 'ten years after it went public', you can still 50x your money. You can achieve outsize gains even if you are 'late', you just need to find the right companies.
You have plenty of time to invest. Peter said that even if you invest in Walmart 'ten years after it went public', you can still 50x your money. You can achieve outsize gains even if you are 'late', you just need to find the right companies.
9. Do not be attached to a stock
Stock is a company and they are not your grand child. The stock does not know that you own the stock. If the fundamentals changes, you may need to change (sell).
Stock is a company and they are not your grand child. The stock does not know that you own the stock. If the fundamentals changes, you may need to change (sell).
10. Read reviews & report not daily financial news
The type of news you should read is those that reviews and compares different products, not daily financial news that focus on today. Investing is about, next year, two years after, a decade away, not today or tomorrow.
The type of news you should read is those that reviews and compares different products, not daily financial news that focus on today. Investing is about, next year, two years after, a decade away, not today or tomorrow.
11. Upside > Downside
If you invest 1000 dollars into the market, the most you can lose is 1000 dollars. But if you make money, you can make 5000, 10000 or even 20000. You can make a lot of money with the upside, and you only need to be right a couple of times.
If you invest 1000 dollars into the market, the most you can lose is 1000 dollars. But if you make money, you can make 5000, 10000 or even 20000. You can make a lot of money with the upside, and you only need to be right a couple of times.
12. Ask yourself: What am I going to do when the market goes down?
If you do not know the answer to this question, you may need to do your research more.
If you do not know the answer to this question, you may need to do your research more.
P.S. Everyone is a long term investor until the market goes down, so really be honest with yourself, what am I going to do? When the stock is down 20%, 30%, or even 50%?
13. Stock price does not equal to company performance
A stock can be down, but the company can be performing well. Focus on the underlying company, not the stock, because the stock price in the long run always reflect the value of the company.
A stock can be down, but the company can be performing well. Focus on the underlying company, not the stock, because the stock price in the long run always reflect the value of the company.
14. Stocks beat Bonds
In the long run (10 years or even longer), stock always beat 'the hell' out of bonds. Also understand that bond funds can also go ups and downs and be volatile.
In the long run (10 years or even longer), stock always beat 'the hell' out of bonds. Also understand that bond funds can also go ups and downs and be volatile.
15. You do not need to buy a stock, but you need to understand a company to buy a stock. Do you understand your holdings?
16. Worries
There are always things to worry about. In every year and decades that the market has gone through, there are always doubts and worries. Focus on the companies, the facts, the fundamentals, and tune out the noise.
There are always things to worry about. In every year and decades that the market has gone through, there are always doubts and worries. Focus on the companies, the facts, the fundamentals, and tune out the noise.
17. You can win
Last but not least, you can definitely make money in the stock market. You can even perform better than institutional investors, but it all goes back to, do you know your holdings well? END//
Last but not least, you can definitely make money in the stock market. You can even perform better than institutional investors, but it all goes back to, do you know your holdings well? END//
Thank you for reading this thread. I hope you enjoyed the thread and have learnt 1 or 2 things about Peter Lynch's investing lessons. If you like the thread I would really appreciate a retweet and a like! Please also follow me @joshuatai0427 for more future content like this!
Thank you all for your support! I hope you have an awesome day!
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