Invest to earn: Key mantra’s for investment from Peter lynch

To invest is a crucial step as it is regarded to last for an individual , it is usually to sustain the investment value over time, but Peter Lynch’s Approach unveils a new dimension where investment can be turned into a robust form of profit or return, getting the best out of an investment is benefitting to businessmen, Government and also people, in general. One can really accentuate their standard of living by learning how to invest to earn, This can really result in different living conditions with a good investing environment.

Peter lynch an American investor and philanthropist is regarded to be legendary because his understanding and application of strategies in investment to be extraordinary this is clearly seen in his work. For example,

-Magellan fund at Fidelity investments was managed by him for 13 years, his management brought about an annual average return of 29.2%, which was the best 20-year performance of any mutual fund ever!

-He has contributed to the S&P 500 more than doubling the stock market index.

-Asset under management (AUM), surged from $18 million to 14 billion.

Let’s look into the mantras and advice given by the philanthropist himself

• Stay Grounded, Invest in what you know

Lynch creates emphasis on the “ Individual approach” invest in something you know is good, example if you like services in a hotel provided to you as a customer, you should go ahead and invest in it rather than waiting it out until you see a “green signal” from an expert or for an upward trend of stocks. Avoiding the attitude and approach of a fund manager will benefit the individual and go a long way he says that one must ensure the understanding of where a company comes from, as behind every stock is a company. Having the right knowledge about their practices and approach, knowing they are reliable is good enough to invest in it, this will ensure to create a domino effect. According to his practical experience, one should always count on specific characteristics of a company.

• Ten-Bagger Approach

This term is adopted from baseball as Lynch is a baseball geek himself

He coined the term ‘Ten Bagger’ which represents two home runs and a double

This can be translated to the scenario where an investment performs ten times better than its purchase price. It refers to the stocks which have the ability to perform multiple times their capacity which even some standardized “good” stocks may not achieve.On their own, these particular stocks have the potential to stretch the limits of growth. This can be explained better as an example where one invests in 10 stocks and among these 9/10 perform below or above average at best providing a margin of return, but that one stock that has the potential to grow multiple folds is the way to go, these are special in their capacity must not be dismissed due to their hidden and multiplying nature of returns just because this can mean they are volatile.

You can use Ticker Screener, in order to find and analyze the good stocks.

Finding such an investment is like digging up treasure, and finding it means one had to explore more, this means one has to take more risks to unturn new treasure rather than sitting it out in the same place for more treasure

It’s a fact investment is no science and one cannot desire it to be perfect and the best approach is to take more risk to identify the right investments.

In his book “One Up”, Lynch explains a strategy where one buys all kinds of stocks, like high and low risk, slow or fast growth pace cyclical and potential turnaround situations, etc, after this one must emphasize being disciplined and sticking to these. Ensure to analyze their behaviors, not being swayed away by market behaviors and not panicking when everyone is selling.

One must learn as an investor to beat the others at their own game.

• Keep it simple

Peter Lynch once said, “The simpler it is, the better I like it.” ensure one does proper research and homework of a company, not being swayed away by the hottest trending stock in the hottest market but sticking to something that will most definitely work in the long run which will require a lot of discipline and extensive research and understanding.

Also when it seems like the time is coming to an end after a good run, don’t be afraid to leave out and quit early ! This was done by Lynch himself as at the height of his success, he called it quits. That was 1990, just before one of the biggest bull markets in history. He managed 1,000 or more stocks and ran the biggest mutual fund at the time.

Tips for beginners for Investment

• Focus on Market leaders

The leaders being at the top is a sign that they have outdone a lot of barriers others haven’t cleared, they have a strong foundation that can ensure uncertainties will take their own sweet time to hurt them enough where they may not recover which will be in the worst case. These companies indefinitely have better visibility of future profits and sustainable growth and are able to make decisions respectively making them a reliable option for long term investment.

• Defensive Industries

The company which caters to customers regardless of seasons and occasions, these tend to be timeless and products for these companies are demanded more or less in the same volume throughout a year this includes products — like drugs, eatables or soft drinks.

This ensures stability and can prove to be a good hedge option when things move south for an investor or amidst a recession.

• Diversification of portfolio

Ensure there is a systematic diversification of stocks, not a clutter which you chose just to ensure diversification, make sure you know which stock you have selected for what purpose and follow up on it.For example , if you have selected one low risk and high-risk stock ensure they perform based on the criteria you have selected them. If your low-risk stock seems more volatile than anticipated you can drop it or replace it for a more low-risk option you can also let go of the high-risk share to ensure you’re not having too much value at risk all at once. Diversification comes at a cost, over-diversification will affect the overall profitability of the portfolio. ensure to monitor the stocks with discipline

Summary of Peter Lynch lessons

Lynch firmly believes that average investors can beat Wall Street professionals.

Do not overly complicate techniques and approach , just keep you basics and foundations unquestionably strong by research and studies and keeping a close watch on investment ensuring they match the expectations you have set with a practical approach and soon you find you have one of the best stocks which is being recommended by a professional before they have recommended and recognized it .
Accordint to Lynch “The basic story remains simple and never-ending. Stocks aren’t lottery tickets. There’s a company attached to every share. Companies do better or they do worse. If a company does worse than before, its stock will fall. If a company does better, its stock will rise. If you own good companies that continue to increase their earnings, you’ll do well.”