Legendary investor Peter Lynch ran the Magellan Fund at Fidelity Investments between 1977 and 1990, averaging an incredible 29.2% return over that time span. He is also the author of incredibly insightful books such as "One Up On Wall Street" and "Beating the Street."
Lynch has written that “stocks are not lottery tickets; there are companies behind them you don’t need to rush.” He treats buying companies like a baseball game in the third inning. For example, with Walmart (WMT, Financial) you could have waited 10 years after they went public and made over 30 times your money.
Below is a chart of Walmart's price since it went public in October 1970.
The link below is a lecture that Lynch gave on investing. He gives some excellent investing advice and he really simplifies his ideas, making investing simple and very easy to understand.
https://www.youtube.com/watch?v=Lxypq_qIw7M
Here is what I thought to be the greatest knowledge from his lecture:
“The math is simple, there have been 93 years a century when the markets had 50 declines of 10% or more. Fifty declines in 93 years but, once every two years the market falls 10%. We call that a correction, but that’s a euphemism for losing a lot of money rapidly. Of those 50 declines, 15 of them have been 25% or more, and that’s known as a bear market. Every six years the market is going to have a 25% decline. That’s all you need to know. If you’re not ready for that, you shouldn’t own stocks. If you like a stock at $14 and it goes to $8, that's good if you understand the company. Take advantage of these declines.”
Lynch also says “the key organ in your body is your stomach, it's not your brain. If you can add 8+8 and get to 16, that’s the only level of math that you need to know. It’s always going to be scary, there's going to be always something to worry about, and you just have to forget about all of that. If you own good companies, you’ll do well."
As we can see from the graph below, Walmart has recently seen a dip in their share price. This is exactly why Lynch argues the stomach is most important to handle the variance and fluctuation of the market.
Always remember what the legendary investor John Marks Templeton once said: “Gratitude melts away anger and fear.” It will help you take the punches to the stomach when there are market corrections as Lynch describes.
Cheers to your investment success.
