I Suggest Reading One of These Every Day, Part I
Peter Lynch is a legendary investor. He managed the Fidelity Magellan Fund from 1977-1990.
The fund had an average return of 29% and beat the S&P 500 every year but two.
If you want a good investment book to read, I encourage you to read his book Beating the Street. There’s so much an investor can learn.
The best part is that he makes investing easy for anyone to understand.
At the end of the book, he sums up the most important things he learned from two decades in investing. He calls them his 25 Golden Rules.
I suggest reading one of these every day. I’d bet that anyone who does will have investment success beyond what they ever could have imagined.
Here’s the first thirteen of the 25 Golden Rules…
- Investing is fun, exciting and dangerous if you don’t do any work.
- Your investor’s edge is not something you get from Wall Street experts. It’s something you already have. You can outperform the experts if you use your edge by investing in companies or industries you already understand.
- Over the past three decades, the stock market has come to be dominated by a herd of professional investors. Contrary to popular belief, this makes it easier for the amateur investor. You can beat the market by ignoring the herd.
- Behind every stock is a company. Find out what it’s doing.
- Often, there is no correlation between the success of a company’s operations and the success of its stock over a few months or even a few years. In the long term, there is a 100 percent correlation between the success of the company and the success of its stock. This disparity is the key to making money; it pays to be patient, and to own successful companies.
- You have to know what you own, and why you own it. “This baby is a cinch to go up!” doesn’t count.
- Long shots almost always miss the mark.
- Owning stocks is like having children – don’t get involved with more than you can handle. The part-time stock picker probably has time to follow 8-12 companies, and to buy and sell shares as conditions warrant. There don’t have to be more than 5 companies in the portfolio at any one time.
- If you can’t find any companies that you think are attractive, put your money in the bank until you discover some.
- Never invest in a company without understanding its finances. The biggest losses in stocks come from companies with poor balance sheets. Always look at the balance sheet to see if a company is solvent before you risk your money on it.
- Avoid hot stocks in hot industries. Great companies in cold, nongrowth industries are consistent winners.
- With small companies, you’re better off to wait until they turn a profit before you invest.
- If you’re thinking about investing in a troubled industry, buy the companies with staying power. Also, wait for the industry to show signs of revival. Buggy whips and radio tubes were troubled industries that never came back.
Stay tuned for part II in this series next week…