Peter lynch one up on wall street summary

#PETER LYNCH ONE UP ON WALL STREET SUMMARY HOW TO#
#PETER LYNCH ONE UP ON WALL STREET SUMMARY PROFESSIONAL#

To find a multibagger (a stock that delivers multiple times returns), you should try to find fast growing companies and of relatively small size. Two other sections of the book are, perhaps, the most interesting for a practising investor. I have a post on this point in my Notes on investing where I highlight that while stock market index may outperform all other asset classes, more than half of individual stocks actually lose money, so it is an important warning against simply buying 5 stocks and expecting to achieve great investment results. One final idea discussed in the first part of the book is that stocks offer best long-term returns compared to other asset classes. He refers to the last five years before the second edition of the book saying that if you missed the best 30 days since 1994, your returns would be half of what you could have earned staying fully invested throughout the period. Related to idea to this thesis on uncertainty is Lynch's advice against trying to time the market and his preference for always staying in the market.

Lynch compares investing to a poker game where you win over time following the right method as opposed to winning in each round. It is important to be prepared to take occasional losses. Lynch also notes that there is always some uncertainty and no one should expect to be right with his stocks all the time. Then finally, when his stocks fall on hard times and the prices fall to below what he paid, he capitulates and sells in a snit. This is precisely the time he ought to be concerned enough to check the fundamentals, but he isn't. Then after he buys at higher prices, he gets complacent because his stocks are going up. He's concerned after the market has dropped or the economy seemed to falter, which keeps him from buying good companies at bargain prices. This section of the book has also a short summary of key behavioural challenges as every investor passes in and out of three emotional states: concern, complacency, and capitulation. As long as valuation is reasonable and balance sheet is not stretched, companies with great products would likely end up generating strong earnings growth pushing prices for their stock along the way.

#PETER LYNCH ONE UP ON WALL STREET SUMMARY PROFESSIONAL#

Other key qualities include patience, common sense, self-reliance, a tolerance for pain, open-mindedness, detachment, persistence, humility, flexibility, willingness to admit mistakes, ability to ignore general panic.Р”Р„n amateur has a few advantages over professional investors, according to Lynch, not only because he / she is not constrained by formal rules, policies and can be more flexible with the weights for individual stocks, but most importantly because an amateur can focus on real products around him that either he enjoys and are popular with his friends and act quickly (after doing his own research first). Lynch also emphasises that a person has to have certain qualities to be a successful investor including making decisions with incomplete information.

The first part highlights that you should allocate that part of your savings that you don't need to spend for the next few years and could even afford to lose and it is better to own a property where you live before you start allocating significant part of your capital on stock investments. Finally, another very useful analytical tool introduced by Lynch is the share price vs earnings chart where two lines for each indicator are put together (when share price significantly deviates from the earnings line it is normally a signal to buy or sell the shares). The book also has a few useful check-lists for best companies and typical mistakes in investing. It also helps in portfolio management deciding on specific weights for each stock. The main investment tool introduced by Lynch is the six categories of investment cases for various companies which help to decide on key issues to focus in each case as well as make decisions on when to buy and sell such companies.

#PETER LYNCH ONE UP ON WALL STREET SUMMARY HOW TO#

The book focused on three main ideas: 1) Personal circumstances before you start investing, 2) How to find best investment ideas, and 3) Portfolio management. Trying to time the market or spend time thinking about future market direction is a waste of time, according to the investment guru. Lynch reiterates a few times that understanding business prospects through first hand knowledge of a particular product (that you may be consuming every day) is the key to success. The core of Lynch's investment philosophy which is discussed in the book is that 'behind every stock there is a business' and, thus, performance of a stock would ultimately reflect performance of the business, namely earnings dynamics.

Peter lynch one up on wall street summary