Peter Lynch is one of the greatest investors in the world achieving an annual return of 29.2% (!) between 1977 and 1990.
This means your investment would have increased 26x (!).
Learn how to improve your returns with these 20 golden investment rules:
This means your investment would have increased 26x (!).
Learn how to improve your returns with these 20 golden investment rules:
Rule 1: Know what you own
You have to know what you own, and why you own it.
This will allow you to make better investment decisions.
You have to know what you own, and why you own it.
This will allow you to make better investment decisions.
Rule 2: Never invest in companies without understanding its finances
The biggest losses in stocks come from companies with poor balance sheets.
Only invest in good companies and your return will increase dramatically.
The biggest losses in stocks come from companies with poor balance sheets.
Only invest in good companies and your return will increase dramatically.
Rule 3: Everyone has the brainpower to make money in stocks
Everyone has the brainpower, but not everyone has the stomach.
If you sell stocks in panic, the stock market is not for you. Bear market and crashes are GREAT investment opportunities.
Everyone has the brainpower, but not everyone has the stomach.
If you sell stocks in panic, the stock market is not for you. Bear market and crashes are GREAT investment opportunities.
Rule 4: Make use of your edge
Your investor’s edge is not something you get from Wall Street experts. It’s something you already have.
Stock information can be found everywhere. On your work, when you go shopping, … Make use of it.
Your investor’s edge is not something you get from Wall Street experts. It’s something you already have.
Stock information can be found everywhere. On your work, when you go shopping, … Make use of it.
Rule 5: Amateur investors have BIG advantages compared to professionals
The stock market is dominated by a herd of professional investors.
When you ignore them and think rational, you have a BIG advantage compared to professionals.
The stock market is dominated by a herd of professional investors.
When you ignore them and think rational, you have a BIG advantage compared to professionals.
Rule 6: Focus on the long term
There is no correlation between the success of a company’s operations and the success of a stock in the short term.
However, in the long term stock prices will ALWAYS follow the underlying fundamentals of the company.
There is no correlation between the success of a company’s operations and the success of a stock in the short term.
However, in the long term stock prices will ALWAYS follow the underlying fundamentals of the company.
Rule 7: Long shots always miss the mark
Don’t invest in hypes or the next big thing.
Instead, invest in quality companies with a healthy balance sheet, high profitability, and good capital allocation.
Don’t invest in hypes or the next big thing.
Instead, invest in quality companies with a healthy balance sheet, high profitability, and good capital allocation.
Rule 8: Don’t overdiversify
Owning stocks is like having children, don’t get involved with more than you can handle.
You should be able to analyze and follow up on every stock you have in your portfolio. This allows you to take better investment decisions when they matter most.
Owning stocks is like having children, don’t get involved with more than you can handle.
You should be able to analyze and follow up on every stock you have in your portfolio. This allows you to take better investment decisions when they matter most.
Rule 9: Have some cash on the sideline
If you can’t find attractive companies, put your money in the bank until you discover some.
It is always a good idea to have some cash on the sideline. This allows you to invest (heavily) when Mister Market has become (too) pessimistic.
If you can’t find attractive companies, put your money in the bank until you discover some.
It is always a good idea to have some cash on the sideline. This allows you to invest (heavily) when Mister Market has become (too) pessimistic.
Rule 10: ROIC is key
You want to invest in companies with a good capital allocation.
The Return On Invested Capital (ROIC) is one of the most important metrics for quality investors. The higher, the better.
You want to invest in companies with a good capital allocation.
The Return On Invested Capital (ROIC) is one of the most important metrics for quality investors. The higher, the better.
Rule 11: Avoid hot stocks
Great companies in cold, non-growth industries are consistent big winners.
For quality investors, the margin of safety lays in the competitive advantage of the company. Invest in great companies with a strong track record.
Great companies in cold, non-growth industries are consistent big winners.
For quality investors, the margin of safety lays in the competitive advantage of the company. Invest in great companies with a strong track record.
Rule 12: Only invest in profitable companies
When you can find a small cap quality company which is a market leader in a niche, you have found a potential multibagger.
When you can find a small cap quality company which is a market leader in a niche, you have found a potential multibagger.
Rule 13: Let your winners run
If you invest $1.000 in a stock, all you can lose is $1.000 but you stand to gain $10.000 or even $50.000 over time if you’re patient.
You need to find a few good stocks to make a lifetime of investing worthwhile.
If you invest $1.000 in a stock, all you can lose is $1.000 but you stand to gain $10.000 or even $50.000 over time if you’re patient.
You need to find a few good stocks to make a lifetime of investing worthwhile.
Rule 14: Small is beautiful
The observant amateur can find great growth companies long before professionals have discovered them.
Do you notice something very interesting at your work or in the shopping mall? This can offer great investment opportunities.
The observant amateur can find great growth companies long before professionals have discovered them.
Do you notice something very interesting at your work or in the shopping mall? This can offer great investment opportunities.
Rule 15: Stock market declines are opportunities
If you’re prepared, corrections can’t hurt you.
Corrections are great opportunities to pick up the bargains left behind by investors who are panicking.
If you’re prepared, corrections can’t hurt you.
Corrections are great opportunities to pick up the bargains left behind by investors who are panicking.
Rule 16: There is always something to worry about
There will always be uncertainty in the economy and on the stock market.
Sell a stock because the company’s fundamentals deteriorate, not because the sky is falling.
There will always be uncertainty in the economy and on the stock market.
Sell a stock because the company’s fundamentals deteriorate, not because the sky is falling.
Rule 17: Don’t look at macro-economic factors
Nobody can predict interest rates, the future direction of the economy, or the movement of foreign currencies.
Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.
Nobody can predict interest rates, the future direction of the economy, or the movement of foreign currencies.
Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.
Rule 18: There are always pleasant surprises to be found in the stock market
If you study 10 companies, you’ll find one for which the story is better than expected. If you study 50, you’ll find five.
The best thing that can happen to you, is buying a stock that goes up 100x.
If you study 10 companies, you’ll find one for which the story is better than expected. If you study 50, you’ll find five.
The best thing that can happen to you, is buying a stock that goes up 100x.
Rule 19: Do your homework
If you speculate in stocks, you have the same chance of success as playing a poker game without looking at your cards.
The stock market rewards people who do their homework.
If you speculate in stocks, you have the same chance of success as playing a poker game without looking at your cards.
The stock market rewards people who do their homework.
Rule 20: Time is on your side when you own stocks of great companies
When the earnings of a stock goes up 10x, the stock price will follow.
When the earnings of a stock goes up 10x, the stock price will follow.
Did you like these 20 Golden Rules?
Here you can find an overview of them all:
Here you can find an overview of them all:
The end.
If you liked this, you can read the full article here.
At the bottom of the article you can download all articles of Peter Lynch (200 pages) for free:
qualitycompounding.substack.com
If you liked this, you can read the full article here.
At the bottom of the article you can download all articles of Peter Lynch (200 pages) for free:
qualitycompounding.substack.com
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