Peter Lynch is an investing legend. Those who invested with him in 1977 $1,000 would have $28,000 only 13 years later. I discuss 7 simple investing rules that could help us reach the same returns by better picking stocks.
Peter Lynch: 7 Investing Rules To Turn $1,000 Into $28,000 In 13 Years
Last year was a banner year for hedge funds in general, as the industry attracted $31 billion worth of net inflows, according to data from HFM. That total included a challenging fourth quarter, in which investors pulled more than $23 billion from hedge funds. HFM reported $12 billion in inflows for the first quarter following Read More
Good day fellow investors. How the heck did he do it. Peter Lynch who was fund manager at Magellan from 1977 till 1990. For 14 years achieved a yearly return of 29 percent. If you invested 1000 when he started after 13 years you would have twenty eight thousand. In this video I'll go through eight rules for success that I have derived from learning about Peter Lynch in order to learn how to replicate the same how to get to those 40 percent per year. The rules are pretty simple straightforward. As Peter Lynch is everybody can apply them. So let's immediately dig into them. You only need a few good stocks in your lifetime. And that's it. So Peter Lynch says that what most investors do is sell stocks after 20 40 percent gain. Instead of holding them for very very long periods Apple's stock in 2006 was trading in nine dollars. Now it's above 150 just a few investors like that and you're set for life. So if you have a long term view and you like to pick great excellent investments that have the potential to be huge. Amazon will grow further. Alibaba all those stocks. Where will those dogs be in 15 years. Pick a few of them.
If just one does well of the five you pick you'll have an extremely good return picking great stocks and holding to them is good. But the second message is the person that turns the most stones wins. So the more stocks you look at the better you will be at finding those ones that will give you huge returns in the long term. If it turn around hundred stones hundreds stocks you will find one. If you turn around a thousand you will find 10 and of those 10 1 will be something amazing and then you buy that one out of a thousand. The more you research the more you learn the higher your knowledge is the lower is your risk the higher is your return. So really hard hard hard work for the first 10 years at Magellan Peter Lynch was working for more than 15 hours a day for six days in a week and then after 13 years he retired because the rhythm was too strong for him for his health and he decided to look slow down a little bit. Nevertheless now we have the Internet. Forty years ago Peter Lynch had to sit at the conference call for an hour. He had to call people go there to get the financial reports. Now you can get everything in one second from your computer desk. So we have a huge advantage and we really really should dig into the tens of thousands of stocks to find a few good investments. Buy what you know many misunderstand this advice thinking Oh I like stocks Starbucks I like their coffee let's buy Starbucks.
Lynch is discussing buy what you know to stay in your area of specialty. So for example if you are working in the steel industry in the car manufacturing industry really tried to dig into that area. What is going on. What is your company ordering. What are they looking into what technologies. And then find such a stock that fits what you have found from European their specialty. When you find something like that the market will usually recognize it in the next six months a year or two years but take advantage of what you know absent a lot of surprises. Stocks are rather predictable over 20 year periods in the next year or two. You can flip a coin as with where stocks will go up and down even if now everybody thinks stocks will go up. But Lynch says that if you take a long term approach to investing you can know where you will get. And we have seen Jack Bogle saying 4 percent is the return from stocks you can expect now. So if you're not happy with 4 percent you have to look for better stocks. All else equal invest in the company with fewer color pictures on their annual report. Every CEO is a marketing guy. His job is to sell you the stock so that the stock price goes higher. So you have to really be careful about buying into flashy companies that don't have really tangible value behind them. Again going back to the research part the more you do the better you will fare when even analysts are bought. It is time to start buying. So when everybody's bought when everybody capitulated them in a sector then it's time to start buying a sector that I think everybody is bored now.
Nobody likes to discuss and even analysts I think have their heads full of it and they are running away from that is uranium. So please subscribe they soon looking at uranium investments morning detail to see if there is a margin of safety dust low risk and we all know the future potential with older reactors coming online line in the next decades. Owning stocks is like having children don't get involved in more than you can handle. So Lynn says each do it yourself investors should follow eight to ten twelve stocks not more and own five of them in their portfolio and rebalance accordingly or hold them for the very very long term holding more. You are just doing what the market is doing and you will probably perform as the market then better buy an index fund and leave it to grow by itself. So in general to conclude about Peter Lynch do a lot of research do even more research buy when things are cheap and stick for them to do long term and tell their value and looks very simple. He invested in lots of sectors waited for them to be cheap bought them and then sold them high. Looks easy. However you need to have a very very strong mind to follow. Keep watching as we constantly discuss investing strategies analyze stocks and discuss personal finance. Thank you for watching and I'll see you in the next.