Lessons from Great Investors

 

Lessons from Great Investors

 

Peter lynch is one of the greatest investors in the world achieving an annual return of 29.2% between 1977 to 1990. That means your investment would have increased 730X.

We mapped all his favorite investment tips for you.

 

Rule Number  1: Know what you own

 You have to know what you own, and why you own it.

 When you know what you own, you’ll be able to take better investment decisions.

 

Rule Number  2: Never invest in companies without understanding their finances

 The biggest losses in stocks come from companies with poor balance sheets.

 Only invest in good companies and your return will increase dramatically.

 

 

Rule Number  3: Everyone has the brainpower to make money in stocks

 Everyone has the brainpower, but not everyone has the stomach.

 If you sell stocks in a panic, the stock market is not for you. Bear markets and crashes are GREAT investment opportunities.

 

 

Rule Number  4: Make use of your edge

 Your investor’s edge is not something you get from Wall Street experts. It’s something you already have.

Stock information can be found everywhere. At your work, when you go shopping, Make use of it

 

 

Rule Number  5: Amateur investors have BIG advantages compared to professionals

 The stock market is dominated by a herd of professional investors.

 When you ignore them and think rationally, you have a BIG advantage compared to professionals.

 

  

Rule Number  6: Focus on the long term

 There is no correlation between the success of a company’s operations and the success of a stock over a few years

 However, in the long term stock prices will ALWAYS follow the underlying fundamentals of the company.

 If the company does well, you will also do well as an investor.

 

Rule Number 7:  Long shots always miss the mark

 Don’t invest in hypes or the next big thing.

 Instead, invest in quality companies with a healthy balance sheet, high profitability, and good capital allocation.

 

 

Rule Number 8:  Don’t over diversify

 Owning stocks is like having children, don’t get involved with more than you can handle.

 You should be able to analyze and follow up on every stock you have in your portfolio.

 When you know what you are doing and made your homework, you’ll be able to take good investment decisions when they matter most.

 

 

Rule Number 9:  Have some cash on the sideline

 If you can’t find attractive companies, put your money in the bank until you discover some.

 It is always a good idea to have some cash on the sideline. This allows you to invest (heavily) when Mister Market has become (too) pessimistic.

 

 

Rule Number 10:  ROIC is key

 You want to invest in companies with good capital allocation.

 Return On Invested Capital (ROIC) is one of the most important metrics for quality investors. The higher, the better.

 

 

Rule Number 11:  Avoid hot stocks

 Great companies in cold, non-growth industries are consistently big winners.

 For quality investors, the margin of safety lies in the competitive advantage of the company. Invest in great companies with a strong track record.