One up on Wall Street by Peter Lynch
Peter Lynch ran the Fidelity Magellan fund between 1977 and 1990, where he averaged a 29% average annual return, and beat the S&P 500, 11 out of 13 years. Here are 20 lessons that I have learnt from One up on Wall Street by Peter Lynch.
Peter Lynch ran the Fidelity Magellan fund between 1977 and 1990, where he averaged a 29% average annual return, and beat the S&P 500, 11 out of 13 years. Here are 20 lessons that I have learnt from One up on Wall Street by Peter Lynch.
1. Everyone has an edge, you just need to find your edge.
For example, if you work at the healthcare industry, you have better understanding of healthcare products over others. Invest accordingly. Don't try to buy oil stocks, buy healthcare stocks, where you edge is at.
For example, if you work at the healthcare industry, you have better understanding of healthcare products over others. Invest accordingly. Don't try to buy oil stocks, buy healthcare stocks, where you edge is at.
2. There are many opportunities
Ten-baggers are not some secret that nobody knows about. You can find ten baggers around your neighbourhood or your workplace. There are many ten baggers! The famous example is Dunkin Donets, where Peter 25x his money on donuts!
Ten-baggers are not some secret that nobody knows about. You can find ten baggers around your neighbourhood or your workplace. There are many ten baggers! The famous example is Dunkin Donets, where Peter 25x his money on donuts!
3. Know your holdings
There is a company behind every stock. A stock is not a lottery ticket, you must know what you own. Investing is not gambling, know your holdings. If you don't know your holdings, it's just like playing poker without knowing your cards.
There is a company behind every stock. A stock is not a lottery ticket, you must know what you own. Investing is not gambling, know your holdings. If you don't know your holdings, it's just like playing poker without knowing your cards.
4. The 2 minute drill
You should be able to explain every stock you hold in 2 minutes to a 10 year old. If you can not do this, you may not understand your holding well enough.
You should be able to explain every stock you hold in 2 minutes to a 10 year old. If you can not do this, you may not understand your holding well enough.
5. You don't need to be right all the time
As a matter of fact, six out of ten is all it takes to produce an enviable record on Wall Street. Therefore, when you picked a wrong stock, reflect on it, learn from it, but don't focus on it for too long!
As a matter of fact, six out of ten is all it takes to produce an enviable record on Wall Street. Therefore, when you picked a wrong stock, reflect on it, learn from it, but don't focus on it for too long!
6. No one can predict the market
Peter cannot predict the market, the chair of the FED cannot predict interests rates 3 years out. Even professionals cannot predict, what chances do you have? Spend your effort to find great companies rather than trying to time the market.
Peter cannot predict the market, the chair of the FED cannot predict interests rates 3 years out. Even professionals cannot predict, what chances do you have? Spend your effort to find great companies rather than trying to time the market.
7. Know the category that your stock fits in
There are six categories, the slow grower, stalwarts, fast growers, cyclicals, turnarounds, and asset plays. All six categories have different risks/rewards. Invest accordingly.
There are six categories, the slow grower, stalwarts, fast growers, cyclicals, turnarounds, and asset plays. All six categories have different risks/rewards. Invest accordingly.
8. Avoid the hottest stock
Avoid the stock that is the hottest stock in the hottest industry, the one that gets the most favourable publicity. 'If you had to live off the profits from investing in the hottest stocks in each successive hot industry, soon you'd be on welfare.'
Avoid the stock that is the hottest stock in the hottest industry, the one that gets the most favourable publicity. 'If you had to live off the profits from investing in the hottest stocks in each successive hot industry, soon you'd be on welfare.'
9. Earnings Earnings Earnings
Always focus on the company's earnings. Know how the company can increase their earnings, know the track record of the company's earnings. A stock at the end of the day is based on a company's earnings.
Always focus on the company's earnings. Know how the company can increase their earnings, know the track record of the company's earnings. A stock at the end of the day is based on a company's earnings.
10. Know your basics
Read the balance sheet, the income statements, figure out the P/E, the cash, the debt, the dividends, the book value, hidden assets, cash flow, growth rates, compensations... Know the story behind a stock, but also make sure you know the financials.
Read the balance sheet, the income statements, figure out the P/E, the cash, the debt, the dividends, the book value, hidden assets, cash flow, growth rates, compensations... Know the story behind a stock, but also make sure you know the financials.
11. Recheck the story
Once you buy a stock, its not a done deal, you need to go back to your original thesis every now and then to check whether the thesis is still intact.
Once you buy a stock, its not a done deal, you need to go back to your original thesis every now and then to check whether the thesis is still intact.
12. Spend some effort in your research
'Invest at least as much time and effort in choosing a new stock as you would in choosing a new refrigerator.'
'Invest at least as much time and effort in choosing a new stock as you would in choosing a new refrigerator.'
13. Have realistic expectations of returns
Don't expect 30% compound annual returns, 15% would be more realistic. Expecting unrealistic return will cause you to be impatient and make fatal mistakes.
Don't expect 30% compound annual returns, 15% would be more realistic. Expecting unrealistic return will cause you to be impatient and make fatal mistakes.
14. When in doubt, tune in later.
It's better to miss the first move in a stock and wait to see if a company's plans are working out. You can still earn a lot of the stock even if you hop on the train several years after the stock has around double, or even 10x.
It's better to miss the first move in a stock and wait to see if a company's plans are working out. You can still earn a lot of the stock even if you hop on the train several years after the stock has around double, or even 10x.
15. Market is down
'If you can't convince yourself ' when I'm down 25%, I'm a buyer, and banish forever the fatal thought 'when i'm down 25 percent, I'm a seller, then you'll never make a decent profit in stocks.' This perhaps is the hardest yet most important rule to remember.
'If you can't convince yourself ' when I'm down 25%, I'm a buyer, and banish forever the fatal thought 'when i'm down 25 percent, I'm a seller, then you'll never make a decent profit in stocks.' This perhaps is the hardest yet most important rule to remember.
16. When to sell?
Peter usually sells when the story changes or the stocks have already achieved his objectives. As it turns out, if you know why you bough a stock in the first place, you'll automatically have a better idea of when to say good-bye to it. So do your research!
Peter usually sells when the story changes or the stocks have already achieved his objectives. As it turns out, if you know why you bough a stock in the first place, you'll automatically have a better idea of when to say good-bye to it. So do your research!
17. Market is always a weighing machine in the long run
The market in the short run can move in the opposite direction of the fundamentals over the short term. But in the long run, fundamentals always determines the stock price.
The market in the short run can move in the opposite direction of the fundamentals over the short term. But in the long run, fundamentals always determines the stock price.
18. Correction
The market is going to decline sharply in the next month, year, or three years, but no body knows when. Just know that there will always be corrections, and be prepare and aware of what you are going to do during those times.
The market is going to decline sharply in the next month, year, or three years, but no body knows when. Just know that there will always be corrections, and be prepare and aware of what you are going to do during those times.
19. Are you right?
Just because the price goes up doesn't mean you're right, and just because the price goes down doesn't mean you're wrong. Many years will be needed until you will be proven right or wrong.
Just because the price goes up doesn't mean you're right, and just because the price goes down doesn't mean you're wrong. Many years will be needed until you will be proven right or wrong.
20. It takes years, not months to produce big results. Be patient. END//
Thank you for reading this thread! I hope you have learnt one or two things about Peter Lynch and some investing tips from him! If you like this thread, please consider liking and retweeting this thread! I would really appreciate it!
Please also consider following me @joshuatai0427, where i post regular investing threads like this one! I hope you all have a great day and may God bless you in everything that you do!
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