Peter Lynch: Investment Approach and Best Quotes

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Learning from the gurus has always been a significant part of the Indian tradition. In fact, one of the most famous Indian mystics, Kabir went on to say that the position of the guru is even higher than that of God. So I thought that the objective of this blog would not be completely fulfilled if I do not include the wisdom from these great men who I give all the credit for my success as an investor. So, starting from today, for the next few weeks, I’ll publish one article giving you an idea about the investment approach of the best investors of the world. Each of the investment gurus I talk about in this series of articles has had a significant influence on my investment knowledge, attitude, and approach. Each of them holds a special place in the investment world and their opinions and teaching are held highly in the investment community.

Today, I would write about write about my favorite stock guru – Peter Lynch. Lynch is somebody who has taught me more about stock investing through his books than all the other stock investors taken together. And that is the reason I admire him so much.

Read: My Investment Philosophy

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Peter Lynch is best known for his performance as a fund manager for Fidelity Magellan Fund between 1977 and 1990. During this period, the fund posted an annual average return of 29%, beating the S&P 500 index in 11 out of 13 years and building the fund’s assets from $20 million to $14 billion. The fund had the best 20-year return rate of any mutual fund in history. His book titled ‘One Up on Wall Street’ is considered one of the best ever books written on equity investing. He coined the term ‘multibagger’ in his books and also invented the quite popular PEG ratio.

Now, let us have a brief look at the major points that summarizes the investment approach of Peter Lynch.

Investment Approach

  1. Peter Lynch believes in owning only what one knows inside out.
  2. He does not believe in predicting the economy and does not spend time analyzing macroeconomic forces like inflation and interest rates.
  3. According to Peter Lynch, good management is a must for considering a company for investments.
  4. Peter Lynch considers knowing the ‘why’ to be very important when buying and selling stocks.
  5. According to Lynch, buying of stocks of a company by its promoters is an excellent way to know what we may expect from the company in the coming times.
  6. He looks for companies that have little to no institutional holdings.

Quotes, I believe, are books in miniature. Let’s look at some of the most popular quotes by Peter Lynch.

Best Quotes

  1. The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them. Stand by your stocks as long as the fundamental story of the company hasn’t changed.
  2. Big companies have small moves, small companies have big moves.
  3. Know what you own, and know why you own it.
  4. Go for a business that any idiot can run – because sooner or later any idiot probably is going to be running it.
  5. This is one of the keys to successful investing: focus on the companies, not on the stocks.
  6. Owning stocks is like having children – don’t get involved with more than you can handle.
  7. Gentlemen who prefer bonds don’t know what they’re missing.
  8. All the math you need in the stock market you get in the fourth grade.

Books

Feel inspired? I recommend you read the books written by Peter Lynch and I can assure you that your perception about stock investing will never be the same. You can click on the book images to buy them directly from Amazon.

#1. One Up on Wall Street

In easy-to-follow terminology, Lynch offers directions for sorting out the long shots from the no shots by spending just a few minutes with a company’s financial statements. His advice for producing “tenbaggers” can turn a stock portfolio into a star performer!

Get it on Google Play

#2. Beating The Street

Legendary money manager Peter Lynch explains his own strategies for investing and offers advice for how to pick stocks and mutual funds to assemble a successful investment portfolio.

Develop a Winning Investment Strategy—with Expert Advice from “The Nation’s #1 Money Manager.” Peter Lynch’s “invest in what you know” strategy has made him a household name with investors both big and small.

An important key to investing, Lynch says, is to remember that stocks are not lottery tickets. There’s a company behind every stock and a reason companies—and their stocks—perform the way they do. In this book, Peter Lynch shows you how you can become an expert in a company and how you can build a profitable investment portfolio, based on your own experience and insights and on straightforward do-it-yourself research.

In Beating the Street, Lynch for the first time explains how to devise a mutual fund strategy, shows his step-by-step strategies for picking stock, and describes how the individual investor can improve his or her investment performance to rival that of the experts.

There’s no reason the individual investor can’t match wits with the experts, and this book will show you how.

#3. Learn to Earn

Mutual-fund superstar Peter Lynch and author John Rothchild explain the basic principles of the stock market and business in an investing guide that will enlighten and entertain anyone who is high-school age or older.

Many investors, including some with substantial portfolios, have only the sketchiest idea of how the stock market works. The reason, say Lynch and Rothchild, is that the basics of investing—the fundamentals of our economic system and what they have to do with the stock market—aren’t taught in school. At a time when individuals have to make important decisions about saving for college and 401(k) retirement funds, this failure to provide a basic education in investing can have tragic consequences.

For those who know what to look for, investment opportunities are everywhere. The average high-school student is familiar with Nike, Reebok, McDonald’s, the Gap, and the Body Shop. Nearly every teenager in America drinks Coke or Pepsi, but only a very few own shares in either company or even understand how to buy them. Every student studies American history, but few realize that our country was settled by European colonists financed by public companies in England and Holland—and the basic principles behind public companies haven’t changed in more than three hundred years.

In Learn to Earn, Lynch and Rothchild explain in a style accessible to anyone who is high-school age or older how to read a stock table in the daily newspaper, how to understand a company annual report, and why everyone should pay attention to the stock market. They explain not only how to invest, but also how to think like an investor.

Stay tuned. I’ll be posting a similar article about the one and only Warren Buffet next week.

Meanwhile, do let me know about the investment guru you admire the most in the comments section below.

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