Peter Lynch Books
Instead of turning to Carl from your local gym for investing advice, you’ll probably be more successful getting advice from an expert.
Who better to turn to than Peter Lynch?
Lynch is widely regarded as one of the best investors in the world.
Back in 1977, Lynch was given his big break when he was given the Magellan Fund to manage. Over the next 13 years, he grew the fund from $20 million to over $14 billion. Investors were drawn in by Lynch’s legendary 29% annual returns. He’s since retired but has passed on his investing knowledge through his books. Peter Lynch’s books offer nuggets of wisdom and a solid investing framework that anyone can use.
Lynch starts off his first book by setting a scene: a 7th grade classroom. Each 7th grader is given the task of researching a company, investing in it, and then explaining their investment choice to the class. Amazingly, the seventh graders beat the S&P 500 by an astonishing 43.5%. He uses this example to show than anybody can be a good investor and as you put in the work.
Lynch has always advocated in investing in what you know. In fact, he says you should only invest in a company if you can draw out why you are investing in it to a 5th grader. If you are able to do this, it means you understand the company and have a solid idea of the business model. Using this method, Lynch believes that amateur investors can actually outperform Wall Street. Another one of his self crested ‘Peter’s Principle’ is to stay calm during times of turbulence in the stock market. He encourages investors to keep in mind they are investing for the long term. It may take time but the markets will always recover and all will be well again with the world. You can now sleep well when the market crashes, knowing that your wealth loss is only temporary.
In this book, Peter Lynch gives reader a sneak peak into his investment strategy. He never went after companies that were popular, instead he scoured the markets till he found a company that was undervalued and had growth potential. In, Beating The Streets, Lynch suggests researching companies whose products you really love. As an individual investor you are at an advantage, because Wall Street is much slower than you in catching trends. Does a particular regional fast food chain seem to be doing well in your area? Keep your eye on it, because odds are it will probably do well nationwide to. Lastly, Lynch’s advises investors to always check up on their portfolio. He does this constantly in order to evaluate whether or notan investments still deserve to be there.
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“Those who fail to learn history are doomed to repeat it”.
In the ‘Learn To Earn’, Lynch dedicates a lengthy 90 pages to the history of capitalism. Although it seems superfluous, it serves a noteworthy purpose. The history lesson will allow investors to understand the mistakes many have made before them. For example: the herd mentality, investing in things you don’t understand, getting in too severe debt. Understanding these basic personal finance skills are absolutely necessary if you want to be a successful investor.
In the book, Lynch forces you to take a long hard look at where you cash is going. If it’s not flowing to the right places you need to turn off the tap (cash flow) and redirect that capital into your investment portfolio. Bottom line,if you spend less than you earn, you can invest the remaining amount in stocks and grow your money.
In terms of allocating that money, Lynch strongly suggests that investing in what you know is the right way to go. He then advises readers on what to look for when researching a company. Lynch says that investors should pay special attention to the management of a company. He believes that the competence of a leader will be reflected in the stock price. Lynch wraps up this book by giving a brief summary of the points discussed in the book.
Peter Lynch’s last and most famous book is titles ‘One up on Wall Street.’ He starts by stating that nobody, not even the Wall Street jockeys, were born great investors. Research is what will eventually transform a novice to a seasoned stock picker.
Something that you may not expect in an investing book, he makes the reader question whether or not investing is right for them. You can’t start investing if you don’t have the capital to get started. According to Lynch, a person shouldn’t hold off on buying a house in order to get rich quick – it’s not going to happen. Here at WSS we couldn’t’ agree more with….Only start investing your money if you have the means of doing so!
If an investor does feel he is ready, Lynch offers them some sound investment advice. Like in his previous books, Lynch reaffirms that investors should stick to what they know and avoid investing in ‘hot’ sectors. It’s an easy way to lose all of your money. Instead, he invites investors to look at stock like a little piece of the company. Where is the company going? What are their earnings prospects? These are all questions Lynch asks when he himself is analyzing a company. Once you complete all this research, if you can’t explain why you want to invest in a company in 2 minutes, don’t invest in it at all.
In ‘One Up on Wall Street,’ Lynch discuss the distractions an investor can face when trying to build their portfolio. Options and futures both serve legitimate purposes, but investors get carried away and see them as get rich quick products. Those are not what they are. It is imperative for the investor to remain focused on investing in undervalued companies that have room to expand their business.
In a suiting end, he reminds you to have conviction. The entire market can say one thing, but if you’re thorough research is saying something else, don’t succumb to their pressure. Invest in what the research tells you and you will be served well.
We hope these books have given you the inspiration to start your investing journey. If you’re interested in learning more about investing from another famous person, check out our top 10 quotes from Gordon Gekko.