Author
Peter Lynch
Genre
Investing
Last Read
May 20, 2020
Cover
Stars
★★★★★
Loved this book so much from one of my favorite investors. Also the retail investor’s bible and true red-pill. Perspective is that of a long-only, long-term growth investor. By far the investing book that influenced me the most.
Peter LynchI’ll be re-reading this on Kindle and adding Kindle highlights.
But until then, please see takeaways and comprehensive notes below that I have categorized. I have gone in and taken quotes from the book to support the chapters, on this page, so everything is from the book.
“Dumb money has advantages. If you invest like an institution, you take their bad with the good”.
“Avoid compounding your errors.”
Key Takeaways
- Invest in What You Know: Lynch's philosophy centers around the idea of "investing in what you know”. Individual investors have an advantage if they choose sectors they are familiar with.Every investor has a unique edge or a particular strength. Understand your edge.
- The Real Meaning of Risk: Lynch redefines risk, suggesting that volatility isn't the real risk. The actual risk comes from not knowing what you're doing.
- Understanding Over Speculation: Lynch is big on the difference between understanding a business and speculating on stocks. The fundamentals of a business are far more important than stock prices (which are just a barometer for the business).
- The Importance of Patience: Lynch believes in a long-term (and long-only) investment strategy. Patience and sticking with a stock, especially if the underlying business and investment thesis remains sound.
- Value of Independent Research: Rather than relying on tips or rumors, use critical and independent thinking to avoid herd mentality, at all times.
- Importance of the Stomach: Lynch believes that emotional resilience is just as important as intellectual understanding when it comes to investing. One must have the stomach to withstand the market's volatility.
- Avoiding Hot Stocks: Don’t just chase the hottest stocks in the hottest sectors.
- Dangers of Overdiversification: While diversifying is important, Lynch warns against over-diversification. Calls it “diworseification”.
- Knowing When to Sell: While Lynch is a proponent of long-term investment, he also believes in the importance of knowing when to exit, especially if the fundamentals of a business change.
Highlights (will be surprised how often the professionals forget the basics):
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Stock Groupings (and what to look for):
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When to Sell
“By careful pruning and rotation based on fundamentals, you can improve your results. When stocks are out of line with reality and better alternatives exist, sell them and switch into something else.”
When to Sell a Slow Grower
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