Peter Lynch: 27 Timeless Investing Lessons
By The Acquirer’s Multiple®
January 2, 2019
•3 min read
We’ve just been re-reading Peter Lynch’s classic book – One Up On Wall Street. In it, Lynch provides 27 timeless investing lessons. Here’s an excerpt from the book:
- Sometime in the next month, year, or three years, the market will decline sharply
- Market declines are great opportunities to buy stocks in companies you like. Corrections—Wall Street’s definition of going down a lot—push outstanding companies to bargain prices
- Trying to predict the direction of the market over one year, or even two years, is impossible
- To come out ahead you don’t have to be right all the time, or even a majority of the time
- The biggest winners are surprises to me, and takeovers are even more surprising. It takes years, not months, to produce big results
- Different categories of stocks have different risks and rewards
- You can make serious money by compounding a series of 20–30 percent gains in stalwarts
- Stock prices often move in opposite directions from the fundamentals but long term, the direction and sustainability of profits will prevail
- Just because a company is doing poorly doesn’t mean it can’t do worse
- Just because the price goes up doesn’t mean you’re right
- Just because the price goes down doesn’t mean you’re wrong
- Stalwarts with heavy institutional ownership and lots of Wall Street coverage that have outperformed the market and are overpriced are due for a rest or a decline
- Buying a company with mediocre prospects just because the stock is cheap is a losing technique
- Selling an outstanding fast grower because its stock seems slightly overpriced is a losing technique
- Companies don’t grow for no reason, nor do fast growers stay that way forever
- You don’t lose anything by not owning a successful stock, even if it’s a tenbagger
- A stock does not know that you own it
- Don’t become so attached to a winner that complacency sets in and you stop monitoring the story
- If a stock goes to zero, you lose just as much money whether you bought it at $50, $25, $5, or $2—everything you invested
- By careful pruning and rotation based on fundamentals, you can improve your results
- When stocks are out of line with reality and better alternatives exist, sell them and switch into something else
- When favorable cards turn up, add to your bet, and vice versa
- You won’t improve results by pulling out the flowers and watering the weeds
- If you don’t think you can beat the market, then buy a mutual fund and save yourself a lot of extra work and money
- There is always something to worry about
- Keep an open mind to new ideas
- You don’t have to “kiss all the girls.” I’ve missed my share of tenbaggers and it hasn’t kept me from beating the market
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