If you are looking to beat the market, it is worth listening to legendary investor, Peter Lynch.
In the 13 years he managed the US-based Fidelity Magellan mutual fund, Lynch achieved an impressive annual return of 29%, growing its assets under management from US$20 million to US$14 billion. Thankfully for investors, Lynch has been very candid about how he succeeded in the market, taking the time to write books and speak to the press.
Here are four quotes of his that we can all learn from.
“When stocks are attractive, you buy them. Sure, they can go lower. I’ve bought stocks at $12 that went to $2, but they later went to $30. You just don’t know when you can find the bottom.”
I have been guilty of waiting for attractively-priced stocks to “go lower”. Unfortunately, the stock never did go lower, and I ended up having to pay more for the same stock a few months later. We never know when a stock can go lower, and waiting to buy at the bottom is a risky business, as Lynch counsels. Whenever you are out of the market, you are at risk of missing out on investment returns.
Lynch prescribes purchasing a stock at a good price. If its attractive, go ahead and buy it. Don’t try to find the bottom.
“I’m always fully invested. It’s a great feeling to be caught with your pants up.”
Some investors prefer having a portion of their investment capital kept in cash. The cash position provides liquidity to buy stocks on a cheap during a market downturn. Lynch, on the other hand, was always fully invested. He believed in the long-term wealth-creating power of the stock market, and preferred having all his money invested so that he can take advantage of long bull markets.
“Your ultimate success or failure will depend on your ability to ignore the worries of the world long enough to allow your investments to succeed.”
There are always reasons to worry in the stock market. Right now, investors are worried about rising interest rates, the emerging market currency crisis, and the trade war between China and the United States. However, as Foolish investors, we should not fret about these short-term scares, and instead focus on the long-term potential of our investments.
“All the math you need in the stock market you get in the fourth grade”
Analysts and market commentators often bombard retail investors with financial jargon, daunting statistics, and complicated explanations on investments. This barrage of information can convince the common investor that they do not have the capacity to navigate the stock market.
Nothing could be further from the truth.
Investing in stocks only requires basic math, and an understanding of business fundamentals. Lynch was a staunch believer that anybody could do well in the stock market as long as they were diligent in studying the company’s fundamentals. After that, all that is needed is to buy the stock at a good price, and stay invested for the long term.
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