3 Things You Must Learn From Investing Guru Peter Lynch

Investors can find a wealth of valuable information in Peter Lynch's three timeless investing principles.

Aug 30, 2014 at 2:01PM


Source: 401kcalculator.

Peter Lynch has been one of the most successful investors in the mutual fund business. He famously ran the Fidelity Magellan Fund from 1977 until 1990, delivering annual average returns of 29% that made it a top-ranked mutual fund over the investment period.

He beat the major S&P 500 index in 11 of 13 years, even as the fund ultimately reached $13 billion under management. Achieving outperformance for so many years with such a big fund is particularly difficult, which is why Lynch enjoys a strong reputation on the Street.

Lynch has also written and co-written several best-selling books about investing, which continue to excite readers thanks to their easy-to-apply investment methodology.

Here are three key thoughts about investments from Lynch.

1. Do your homework and select your investments wisely
Lynch famously said,"The person that turns over the most rocks wins the game. And that's always been my philosophy."


Source: Businessinsider, Peter Lynch.

This is just another way of saying, have high discriminatory investment standards and be extremely selective. If you are looking for undervalued stocks, you must do the homework and turn over many stones to find the hidden gems that have the potential to deliver outstanding returns.
Don't buy what everybody else buys. Look for value off the beaten path in areas of the stock market that the mainstream investor shuns.
2. Don't try to be a market timer
According to Lynch: "When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom."

A lot of high-value advice here: Many investors try to time the market by forecasting peaks and bottoms of stock prices, or even the stock market itself. Don't waste your time here: Nobody can credibly claim to be able to accurately forecast future events over long periods.
Instead, do your research homework (see No. 1) and invest for the long term. Timing the market is a loser's gamble.
3. Get rid of your gambling attitude
In Lynch's words, "Although it's easy to forget sometimes, a share is not a lottery ticket ... it's part-ownership of a business."
Sad to say, but many people who "invest" in stocks really don't think like owners; they are more like short-term renters of a business.
Lynch is pretty well on the same wavelength as Buffett on this one: Shares represent a stake in an actual business, one that you would want to succeed over the long run. The erratic price movements seen every day on a stock ticker board have the potential to distract you from the bigger picture and seduce you into trading.
Put simply: Be serious about investing, don't chase the money, and don't trade.

The Foolish takeaway
Peter Lynch has been an extremely successful equity investor, and his investment philosophy contains some valuable nuggets for the investor today.

His investing approach is as timeless as it is direct: do your research, be willing to turn over a lot of stones to find value, invest for the long term, and don't mindlessly trade stocks.

This philosophy has produced Lynch's sterling returns over a long time period, and the application of such timeless investing principles might serve your returns just as well.

How to get even more income during retirement
Social Security plays a key role in your financial security, but it's not the only way to boost your retirement income. In our brand-new free report, our retirement experts give their insight on a simple strategy to take advantage of a little-known IRS rule that can help ensure a more comfortable retirement for you and your family. Click here to get your copy today.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers