In this Blog i am going to share 7 golden rules stated by Mr. Peter Lynch in His Famous Best selling Stock Market Book Named as Beating the Street.
1- Investing is Fun, exciting, and Dangerous If you don’t do any work.
In this statement peter lynch says that investing can be exiting and fun also if you do it in a proper way by doing appropriate research before investing it can be highly rewarding but on the other hand it can be dangerous also if you don’t do any kind of research like what company does how it will grow in future and do investing on the basis of tips and rumor stocks that it can be dangerous and can burn your hard earned saving.
2- Your investor’s edge is not something you get from wall street experts. its something you already have. You can outperform the experts if you use your edge by investing in companies or industries you already understand.
In this statement peter lynch says that your stock picking skills not developed from wall street experts it is something we already have a person can outperform the experts if he or she uses his edge by investing in companies or industries that they already know for example a doctor knows best about pharmaceutical companies he knows which companies makes best quality drugs for patients and observing that he can buy a good pharma company but instead of that most people generally buy stocks in the companies which they know nothing much about it like investing in steel manufacturing company or a chemical company so instead if doing that one can use his edge in investing means by investing in companies which they know about a lot that others so they can even outperform experts.
3- Over the past three decades, the stock market has come to be dominated by herd of professional investors. contrary to popular belief, this makes it easier for the amateur investor. you can beat the market by ignoring the herd.
In this statement peter lynch says that over the past three decades the stock market has come to be dominated by herd of professional investors means that stock market has outperform other asset classes like government bonds and treasury bills so in the long run stock market rewards the highest return on investment but it happens only of you ignore the popular belief and News.
4- Behind every stock there is a company. Find out what it’s doing.
In this statement peter lynch says that behind every stock which trades in the stock market there is a company who runs business so find out which company does what kind of business and understand their business model and future goals buying stock on rumor won’t make money or buying stock just because it name looks fancy does’nt mean that stock will perform well in the market. so treat stock like a business and find out which company do what invest in those companies in which you understand their business and future growth plans.
5- Often there is no Correlation between the success of a company’s operations and the success of it’s stock over a few months or even a few years. in the long term, there is a 100% correlation between the success of the company and the success of its stock. this disparity is the key to making money; it pays to be patient , and to own successful companies.
In this statement peter lynch says that in the short run there is no correlation Between success of company with its stock price but in the long run the the success of company has 100% correlation with its stock price if a company does well in long run it stock will surely perform well in the long run so its always rewarding to be patient and hold stock from a long term perspective.
6- You have to know what you own and why you own it. “this baby is cinch to go up!” doesn’t count.
In this statement peter Lynch says that you should know why you own a stock and what does that company do in simple invest in companies that you know about by predicting that this stock will go up without any research doesn’t make you money.
7- Owning stocks is like having children – don’t get involved with more than you can handle.
In this statement peter lynch says that owning stocks is like having children so don’t get involved with too much stocks because it is not easy to analyze each and every company as a single stock picker so invest in companies which you can handle easily because too much stock can put you in a lot of burden to check each and every stock which can effect your returns so own stocks which you can manage easily an average 5 stocks portfolio is lot better than portfolio of 20 to 25 stocks.
Conclusion:
So these are the 7 Golden investment Rules by Mr. Peter lynch from his Book beating the street so make sure to learn from these rules which can help an amateur investors to succeed and can avoid Dangerous mistakes in the market and can make money easily and consistently.
Check out our other posts:
https://dalalstreetupdates.com/peter-lynch-investing-lessons-from-his-book/
https://dalalstreetupdates.com/cash-flow-statement-meaning-and-uses/
https://dalalstreetupdates.com/what-is-price-to-earning-ratio-uses-of-it/
https://dalalstreetupdates.com/what-is-debt-to-equity-ratio-its-uses/
https://dalalstreetupdates.com/what-is-dividend-of-a-company/
Check out for more from external sources:
https://en.wikipedia.org/wiki/Peter_Lynch
Stay tuned for more Educational finance blogs and learnings from Great investors like Mr. peter lynch , Mr. warren buffet, Mr. Rakesh Jhunjhunwala, Mr. Vijay kedia etc. and many more.