The Hindu Business Line : Investment Nuggets

Peter Lynch, who managed the Fidelity Magellan Fund from 1977 to 1990, is regarded as one of the most successful fund managers in America. Lynch’s books, One up on Wall Street and Beating the Street express his investment philosophy.

His most famous principle was, “Invest in what you know”. His other stock-picking principles include, “Do your research and set reasonable expectations”, “Know the fundamentals”, “Invest for the long-run’.

Some investment nuggets from him:

“Investing without research is like playing stud poker and never looking at the cards.”

“Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.”

“Bargains are the holy grail of the true stock picker. The fact the 10 to 30 per cent of our net worth is lost in a market sell-off is of little consequence. We see the latest correction not as a disaster but as an opportunity to acqu ire more shares at low prices. This is how great fortunes are made over time.”

“Things are never clear on Wall Street, or when they are, then it’s too late to profit from them. The scientific mind that needs to know all the data will be thwarted here.”

“You get recessions, you have stock market declines. If you don’t understand that’s going to happen, then you’re not ready, you won’t do well in the markets.”

“... We’re forcing people to do the wrong things. They look at what’s hot. They spend so much time trying to figure out if the market is going up. That’s so unimportant. It’s about earnings. They need to follow the earnings.”

“If you spend more than 13 minutes analysing economic and market forecasts, you’ve wasted 10 minutes.”

“It is the rare investor who doesn’t secretly harbour the conviction that he or she has a knack for divining stock prices or gold prices or interest rates. In spite of the fact that most of us have been proven wrong again and ag ain, it’s uncanny how often people feel most strongly that stocks are going to go up or the economy is going to improve just when the opposite occurs.”

“When it comes to predicting the market, the important skill here is not listening, it’s snoring. The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them. Stand by your stocks as lo ng as the fundamental story of the company hasn’t changed.”

“Absent a lot of surprises, stocks are relatively predictable over 10-20 years. As to whether they’re going to be higher or lower in two or three years, you might as well flip a coin to decide.”

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