Some wise words from Peter Lynch on Stock Investing

[Dennis Ng]

Listen to what Peter Lynch, the legendary Fund Manager had to say about Stock Investing.

Cheers!

Dennis Ng, http://www.MasterYourFinance.com


"Well, I think the secret is if you have a lot of stocks, some will do
mediocre, some will do okay, and if one of two of 'em go up big time, you produce a fabulous result. And I think that's the promise to some people.

Some stocks go up 20-30 percent and they get rid of it and they hold onto the dogs. And it's sort of like watering the weeds and cutting out the flowers. You want to let the winners run. When the fun ones get better, add to 'em, and that one winner, you basically see a few stocks in your lifetime, that's all you need. I mean stocks are out there.

When I ran Magellan, I wrote a book. I think I listed over a hundred stocks that went up over ten-fold when I ran Magellan and I owned thousands of stocks. I owned none of these stocks. I missed every one of these stocks that went up over ten-fold. I didn't own a share of them.

And I still managed to do well with Magellan. So there's lots of stocks out there and all you need is a few of 'em. So that's been my philosophy. You have to let the big ones make up for your mistakes.

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. This is not like pure science where you go, "Aha" and you've got the answer. By the time you've got "Aha," Chrysler's already quadrupled or Boeing's quadrupled. You have to take a little bit of risk."


"Even the most thoughtful and steadfast investor is susceptible to the
influence of skeptics who yell 'Sell' before it's time to sell? We've all been taught the same adages: 'Take profits when you can, and 'A sure gain is always better than a possible loss.'

But when you've found the right stock and bought it, all the evidence tells you it's going higher, and everything is working in your direction, then it's a shame if you sell. A fivefold gain turns $10,000 into $50,000, but the next five folds turn $10,000 into $250,000. Investing in a 25-bagger is not a regular occurrence even among fund managers, and for the individual, it may only happen once or twice in a lifetime. When you've got one, you might as well enjoy the full benefit."

[candy_chia]

A lot of fund manager worry about "liquidity."

=> They Avoided All the Wonderful Small Companies - a good collection of these could do wonders even for a big portfolio - because the stocks were "THINLY TRADED."

- They (fund managers) would get so absorbed in this problem of finding stocks they could get in and out of in 5 days or less that they'd lose sight of whether these things were worth owning in the first place.

If stocks as in romance, ease of divorce is not a sound basis for commitment.
~~If you've CHOSEN WISELY to begin with, you won't want a divorce.
~~~ And if you haven't, you're in a mess no matter what.

All the Liquidity in the world Isn't going to Save you from Pain, Suffering, and probably a LOSS OF MONEY.


Source: Beating the Street by Peter Lynch with John Rothchild

[candy_chia]

There's No Shame in Losing Money on a Stock. Everybody does it.

=> What is Shameful is to HOLD ON to a stock, or, Worse, to BUY MORE of it, When the FUNDAMENTALS are DETERIORATING.


Source: Beating the Street by Peter Lynch with John Rothchild

[candy_chia]

“Insiders might sell their shares for any number of reasons, but they buy them for Only One: they think the price will rise.”

[candy_chia]

Well, I think flexibility is one of the key things.

~~ I mean I would buy companies that had unions.

~~~ I would buy companies that were in the steel industry. I'd buy textile companies.

===> I always thought there was Good Opportunities Everywhere and, researched my stocks myself.

I mean Taco Bell was one of my first stock I bought.

I mean the people wouldn't look at a small restaurant company.

So I think it was just looking at different companies and I always thought
- if you looked at 10 companies, you'd find one that's interesting,
- if you'd look at 20, you'd find two, or
- if you look at hundred you'll find ten.

The person that Turns Over the MOST Rocks Wins the game.

And that's always been my philosophy.

http://www.pbs.org/wgbh/pages/frontline ... lynch.html

[candy_chia]

“As I look back on it now, it’s obvious that studying History and Philosophy was much better preparation for the stock market than, say, studying statistics.

Investing in Stocks is an Art,

NOT a Science,

and people who’ve been trained to rigidly quantify everything have a big disadvantage.

If stockpicking could be quantified, you could rent time on the nearest Cray computer and make a fortune.

But it doesn’t work that way. All the math you need in the stock market you get in the fourth grade.”

[ngtfook]

I think investing is a combination of Science and Art.

When analysing, we use science and quantitative method.
When executing (buy/hold/sell), we use science and art.

“As I look back on it now, it’s obvious that studying History and Philosophy was much better preparation for the stock market than, say, studying statistics.

Investing in Stocks is an Art,

NOT a Science,

and people who’ve been trained to rigidly quantify everything have a big disadvantage.

If stockpicking could be quantified, you could rent time on the nearest Cray computer and make a fortune.

But it doesn’t work that way. All the math you need in the stock market you get in the fourth grade.”

[candy_chia]

Personally, I think the key point is that one shouldn't search for precise number (maybe more appropriate to focus on price range),

as Peter Lynch reiterated that

"people who’ve been Trained to Rigidly Quantify EVERYTHING have a Big Disadvantage."

I think investing is a combination of Science and Art.

When analysing, we use science and quantitative method.
When executing (buy/hold/sell), we use science and art.

“As I look back on it now, it’s obvious that studying History and Philosophy was much better preparation for the stock market than, say, studying statistics.

Investing in Stocks is an Art,

NOT a Science,

and people who’ve been trained to rigidly quantify everything have a big disadvantage.

If stockpicking could be quantified, you could rent time on the nearest Cray computer and make a fortune.

But it doesn’t work that way. All the math you need in the stock market you get in the fourth grade.”