Peter Lynch authored ‘One up on wall street’ is one of the best books for beginners to learn investing. His charisma of explaining complex ideas by simple words is what differentiates One up on wall street from other famous stock market investing books.
First of all, if you don’t know who Peter Lynch is?-?let me give you a quick introduction. Peter Lynch is an American Investor and a former-fund manager of the Magellan fund at Fidelity Investments between 1977 and 1990. During this period, Lynch averaged a 29.2% annual return on his investments. During this period of 13 years, the asset under the management which was initially $18 million in 1977 increased to $14 billion.
His book ‘One up on wall street’ was originally published in 1989 and subsequently became a best-seller. The book covers his practical and approachable strategies for stock investing by illustrating points (with examples) from his own experience.
Here are five of the best wisdom from Peter Lynch’s one up wall street which makes the book timeless:
1. “Only invest what you could afford to lose without that loss having any effect on your daily life in the foreseeable future.”
One of the biggest mistakes that beginner’s make is investing the money that they are going to need in short term like the next six months or a year. No one can predict the returns from the stock market, no matter how safe and appealing the company may sound. Do not invest the money in stocks that you will need to pay your next month rent, college fee or your credit card due. Only spend what is surplus.
2. “Invest in what you know.”
Peter Lynch suggests that many great investments opportunities could be right under the nose of everyday people if they look around. He argues that he has made a return of 10–15x from companies like Dunkin’ Donuts, which is not a rare company but known to most. An average person is exposed to exciting local companies and products years before the professional investors. If they invest in what they know, even ordinary investors can make amazing returns.
3. “If you want to avoid a single stock, it would be the hottest stock in the hottest industry.”
In his book, Peter Lynch argues that no one can get huge returns by investing in something which everyone already knows. The companies that generally appears dull or boring are the ones who give the best result. These are the ones who are not targeted by the analysts and hence do not have any market pressure. Such stocks may be available at a good discount and capable of giving consistent returns to their investors.
4. “Do not try to predict the economy. A great many personalities have failed. Predicting the economy is futile.”
Until and unless trained to do so, an ordinary investor does not possess the knowledge to predict the economy correctly and consistently. It would be more fruitful for everyday investors if they spend more time researching stocks and reading their financials & annual reports, instead of predicting the economy.
5. “The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them.”
Investing based on gut feeling is always dangerous for investors. No matter how firmly you believe that the company may perform well in the future, if you can’t find the facts and figures to stand by your argument, the results may be devastating. Here, self-discipline plays a crucial role to ignore your gut feelings.
Enjoyed the five lessons? Here is a bonus video on Peter Lynch advises on how an average investor can beat the market.
The book ‘One up on wall street’ explains many investing wisdom, however, the above five are my favorite ones. If you haven’t read this book yet, I would highly recommend you to read it. It ranks first on the list of my top ten stock market investing books.
Apart, if you’ve read the book and believe that I missed any critical lesson, please comment below. Happy Investing!!