Peter Lynch: 27 Timeless Investing Lessons

Johnny HopkinsInvesting Strategy, Peter Lynch2 Comments

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We’ve just been re-reading Peter Lynch’s classic book – One Up On Wall Street. In it, Lynch provides 27 timeless investing lessons. Here’s an excerpt from the book:

  1. Sometime in the next month, year, or three years, the market will decline sharply
  2. Market declines are great opportunities to buy stocks in companies you like. Corrections—Wall Street’s definition of going down a lot—push outstanding companies to bargain prices
  3. Trying to predict the direction of the market over one year, or even two years, is impossible
  4. To come out ahead you don’t have to be right all the time, or even a majority of the time
  5. The biggest winners are surprises to me, and takeovers are even more surprising. It takes years, not months, to produce big results
  6. Different categories of stocks have different risks and rewards
  7. You can make serious money by compounding a series of 20–30 percent gains in stalwarts
  8. Stock prices often move in opposite directions from the fundamentals but long term, the direction and sustainability of profits will prevail
  9. Just because a company is doing poorly doesn’t mean it can’t do worse
  10. Just because the price goes up doesn’t mean you’re right
  11. Just because the price goes down doesn’t mean you’re wrong
  12. Stalwarts with heavy institutional ownership and lots of Wall Street coverage that have outperformed the market and are overpriced are due for a rest or a decline
  13. Buying a company with mediocre prospects just because the stock is cheap is a losing technique
  14. Selling an outstanding fast grower because its stock seems slightly overpriced is a losing technique
  15. Companies don’t grow for no reason, nor do fast growers stay that way forever
  16. You don’t lose anything by not owning a successful stock, even if it’s a tenbagger
  17. A stock does not know that you own it
  18. Don’t become so attached to a winner that complacency sets in and you stop monitoring the story
  19. If a stock goes to zero, you lose just as much money whether you bought it at $50, $25, $5, or $2—everything you invested
  20. By careful pruning and rotation based on fundamentals, you can improve your results
  21. When stocks are out of line with reality and better alternatives exist, sell them and switch into something else
  22. When favorable cards turn up, add to your bet, and vice versa
  23. You won’t improve results by pulling out the flowers and watering the weeds
  24. If you don’t think you can beat the market, then buy a mutual fund and save yourself a lot of extra work and money
  25. There is always something to worry about
  26. Keep an open mind to new ideas
  27. You don’t have to “kiss all the girls.” I’ve missed my share of tenbaggers and it hasn’t kept me from beating the market

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2 Comments on “Peter Lynch: 27 Timeless Investing Lessons”

  1. Hi Johnny,

    Rules 13 and 14 seem to go completely against TAM. Care to comment?

    13) Buying a company with mediocre prospects just because the stock is cheap is a losing technique

    14) Selling an outstanding fast grower because its stock seems slightly overpriced is a losing technique

    Cheers,
    Jesse

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