market folly

Peter Lynch ran Fidelity's Magellan Fund for 13 years and was regarded as one of the most successful investors during his tenure.  Lynch outlines the broad gist of his investment philosophy with various pearls of basic wisdom in his book, Beating the Street. 

Last week we detailed Lynch on using your edge in investing.  This time we wanted to focus on some more of his advice, taken both from "Peter's Principles" and his "Golden Rules of Investing":


Peter's Principles

- "Never invest in any idea you can't illustrate with a crayon"

-"You can't see the future through a rearview mirror"

- "When yields on long-term government bonds exceed the dividend yield of the S&P 500 by 6 percent or more, sell your stocks and buy bonds."

- "The best stock to buy may be the one you already own."


Peter Lynch's Golden Rules of Investing

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

- "Never invest in a company without understanding its finances.  The biggest losses in stocks come from companies with poor balance sheets.  Always look at the balance sheet to see if a company is solvent before you risk your money on it."

- "Everyone has the brainpower to make money in stocks. Not everyone has the stomach. If you are susceptible to selling everything in a panic, you ought to avoid stocks and stock mutual funds altogether."

- "Time is on your side when you own shares of superior companies. You can afford to be patient –even if you are missed Wal- Mart in the first 5 years, it was a great stock to own in the next 5 years. Time is against you when you own options."

You can find the rest of Lynch's principles & rules in his book Beating the Street.


And to learn more about this great investor, check out his other book One Up On Wall Street and our recent post: Lynch on using your edge in investing.