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Peter Lynch’s “One Up on Wall Street”: 30 Years Later

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“Go for a business that any idiot can run – because sooner or later any idiot probably is going to be running it.” – Peter Lynch

Peter Lynch is known as one of the greatest investors because of his management of the Fidelity Magellan Fund from 1977 to 1990. During this period, his mutual fund posted an annual average return of 29.2%, which was almost double the S&P 500 (it posted an average return of 15.8%). No other fund manager has ever beat Lynch, before or after him. Lynch has written a couple of books laying out his strategy including One Up on Wall Street, Beating the Street, and Learn to Earn. Now, I want to focus on One Up on Wall Street since it was the first book he published (1989) and reflect on its impact 30 years later. I recently read One Up on Wall Street, and it’s had a profound impact on how I look at investing. While I highly recommend that you read One Up on Wall Street, there are several principles that Lynch talks about in his books that are still applicable today. 

  1.     Know what you own.
  2.     It’s futile to predict the economy and interest rates.
  3.     You have plenty of time to identify and recognize exceptional companies.
  4.     Avoid long shots.
  5.     Good management is very important – buy good businesses.
  6.     Be flexible and humble, and learn from mistakes.
  7.     Before you make a purchase, you should be able to explain why you’re buying.
  8.     There’s always something to worry about.

Lynch is especially known for the first principle—he only invested in companies that he knew about or could easily learn about. He also was a long-term investor and didn’t worry about short-term market volatility.

Throughout the book, Lynch had a lot of memorable phrases. One that stuck with me was that “stocks are not lottery tickets. There’s a company behind every stock and they go up for a reason”. When you talk to most people about the stock market, they often talk about high profile stocks such as Amazon (AMZN) or Lyft (LYFT), which recently went public. They think of the stock market as a giant lottery when it, in reality, it isn’t—it’s an opportunity to own a piece of a fantastic business. While you don’t have to do any research to buy a lottery ticket, a stock requires some research before making an investment.

Lynch is also known for “buying what you know”. This approach is exactly what it sounds like: you understand how that company makes money before investing in it. Most of Lynch’s most successful stock picks were often companies that sold simple products such as Ford, which sells cars. Investing in what you know allows you to better understand the potential risks and future opportunities that a company has.

Most investors think of Benjamin Graham’s The Intelligent Investor as the Bible of investing, there’s another book that I argue is a better read for new investors: One Up on Wall Street. While The Intelligent Investor has sound principles, it’s a very dry book and written in the 1950s. On the other hand, One Up on Wall Street is paced well and Lynch is an engaging writer. Although some of the companies in the book don’t exist anymore (Toys R Us, may you rest in peace), it’s easy enough for anyone to pick up and read. If you haven’t read it yet—do it. I guarantee, it will fundamentally alter your outlook on investing for the better and make you a more successful investor.

Buy One Up on Wall Street on Amazon: One Up on Wall Street Amazon Link

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Co-founder and Managing Editor at | Website | + posts

I cover stocks and the economy!

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