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"Don't Cut The Flowers And Water The Weeds"
We review some of the best investing quotes from legendary investor Peter Lynch
In the world of investing, there are only a few individuals who have managed to achieve legendary status. Among them is Peter Lynch, an exceptional investor who revolutionized the concept of stock picking and achieved unparalleled success during his tenure at Fidelity Investments. With his unique investment philosophy and ability to spot hidden gems in the market, Lynch became a household name and an inspiration to countless investors worldwide.
A brief background
Peter Lynch was born on January 19, 1944, in Newton, Massachusetts, USA. He attended Boston College, where he studied history and graduated with a Bachelor of Arts degree. Following his education, Lynch briefly worked as a caddy and as a summer intern at Fidelity Investments. Impressed by his dedication and enthusiasm, Fidelity offered him a full-time position upon his graduation in 1965.
At Fidelity, Lynch started as a research analyst and gradually moved up the ranks. In 1977, he was appointed as the manager of the Magellan Fund, one of Fidelity's flagship mutual funds. Under his leadership, the fund's assets skyrocketed from a mere $18 million to an astonishing $14 billion within a span of thirteen years. This phenomenal growth made the Magellan Fund the largest mutual fund in the world at the time.
The thirteen year performance in question versus the S&P 500 is shown below:
Quotes to live by
"Investing without research is like playing stud poker and never looking at the cards."
Peter Lynch emphasises the importance of conducting thorough research before making any investment decisions. Understanding the fundamentals of a company, its competitive advantages, and its growth prospects is crucial for successful investing. Blindly investing without proper research is akin to gambling, and Lynch encourages investors to be diligent in their analysis.
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"The stock market is filled with individuals who know the price of everything, but the value of nothing."
Lynch reminds investors that the true value of a stock lies beyond its price. Market fluctuations can often make investors overly focused on short-term price movements. However, understanding the intrinsic value of a company, considering its growth potential, earnings, and competitive position, is crucial for making informed investment decisions.
"Know what you own, and know why you own it."
This quote emphasizes the significance of understanding the businesses in which you invest. Before investing in a company, it is essential to know its industry, products or services, revenue sources, and management team. Lynch encourages investors to have a clear rationale for owning a particular stock, as it enables better decision-making and helps withstand short-term market volatility.
"The key to making money in stocks is not to get scared out of them."
Investing in the stock market can be emotionally challenging, especially during periods of market downturns or heightened volatility. Lynch advises investors to stay focused on the long-term prospects of the companies they own and not be swayed by short-term market fluctuations. Successful investors exhibit patience and discipline, allowing their investments to compound over time.
"In this business, if you're good, you're right six times out of ten. You're never going to be right nine times out of ten."
Lynch acknowledges that investing is not about being right all the time but rather achieving a net positive outcome. Even the most successful investors make mistakes, and Lynch's quote serves as a reminder that occasional missteps are inevitable. The key is to learn from those mistakes, adapt, and maintain a disciplined approach to investing.
"The best stock to buy may be the one you already own."
Lynch suggests that investors should not be quick to overlook their existing investments in search of new opportunities. Sometimes, the most lucrative investments are the ones investors already hold in their portfolio. By continuously monitoring and reassessing the performance and prospects of existing holdings, investors can identify potential winners and make informed decisions.
“Selling your winners and holding your losers is like cutting the flowers and watering the weeds.”
When we sell our successful investments, our portfolio loses its strongest performers, much like cutting off blossoming flowers prematurely. On the other hand, holding onto underperforming assets is akin to nurturing undesirable weeds, diverting resources and attention away from more promising opportunities. In essence, Lynch reminds us of the importance of recognizing and nurturing our winners while swiftly addressing and cutting our losses to cultivate a flourishing investment portfolio.