From someone who is considered one of the greatest investors of all time
During the past century, many of the world’s leading economists have studied the science – or art – of investing. A large number of investing systems, models, and theories have been created, most of them requiring a PhD to understand. But when it comes to learning how to invest, sometimes it’s best to turn to the people who actually do it for a living.
Case in point, take Peter Lynch.
From 1977 through 1990, Lynch ran one of the most successful mutual funds ever, posting an average annual return of 29%. Over his career, Lynch espoused many investing principles, but there are seven in particular that I think all investors should keep in mind.1 So without further ado, here are:
Peter Lynch’s 7 Rules of Investing
1. KNOW WHAT YOU OWN. Invest in companies, industries, and funds you understand well. What do they do? Who uses their goods or services? Is it a company you would want to do business with yourself?
2. PREDICTION IS FUTILE. No one can predict where the markets will go or what the economy will do, so don’t even try. Instead, focus on what you can control, like the types of companies or funds you invest in, how much you save, etc.
3. BEFORE YOU BUY, BE ABLE TO EXPLAIN. Before investing, can you explain to a family member what you’re buying and why? Can you describe how that company or fund works? If not, take your time and do more research.
4. AVOID LONG SHOTS. Investing isn’t gambling, either. While we have no control over the markets, we do have control over how much risk we take on. Your portfolio isn’t the place for speculation or bets. For that, head to Vegas.
5. BUY GOOD COMPANIES. Invest in companies that have proven management, a strong business model, and that sell things people actually use. Otherwise, you’re investing in companies you guess might prove popular…and that’s just another form of gambling.
6. LEARN FROM YOUR MISTAKES. Even the greatest investors sometimes get things wrong. When that happens, accept it humbly and try to determine how you can improve.
7. TAKE YOUR TIME. Investing isn’t a race. You have plenty of time to do your research and find outstanding companies to invest in. Follow the tortoise’s example, not the hare’s.
Ultimately, all investing comes with risk, and there is no strategy or rule that guarantees success. But there are solid “rules of thumb” you can follow to make smart, simple investment decisions. And best of all, you don’t need a PhD to understand them!
1 “The Greatest Investors: Peter Lynch” https://www.investopedia.com/university/greatest/peterlynch.asp
Most Popular Financial Stories
EVs―The Next Big Thing
EVs―The Next Big ThingAn Interesting EmailWe recently received an interesting email from a reader of our RFS website. Katie Griffin is a Senior Communications Specialist at EcoWatch.org, a group devoted to disseminating information on the environment to help reduce...
Bitcoin – There’s No There There
The Big Guys Move InOn September 13, 2022, the biggest of the big guys on Wall Street came out with a rather earth-shaking announcement. None other than Fidelity, Citadel Securities, and Charles Schwab have launched a new cryptocurrency exchange. In the words of the...
Look! Have You Noticed? Listen to any politician or any news commentator these days, and they always begin a discussion or answer a question like this: Look, when I served in the Senate …. Look, as I wrote in my last column …. Look, if the Republicans won’t …. Look,...
Special Market Update
Inflation is proving to be far more tenacious than financial markets had hoped.The idea that inflation peaked in March was put to rest last week when the Consumer Price Index (CPI) showed that inflation accelerated in May. Overall, prices were up 8.6...
All,You undoubtedly have heard reports that the world’s supply of wheat and corn are in jeopardy due to Ukraine and Russia both missing this season’s planting window for obvious reasons (click the link above to read more details). Did you know that Russia...
Significant Shrinkage Buffeted by Inflation Is it time to double check your household budget? Chances are the budgeted expenditures of the vast majority of Americans are about to get buffeted. Or so says the Oracle of Omaha. In the latest shareholder...