Recipes for individual investor
Fortunately, today the reality is that many of us are drawn to home baking. If you need a rich income, knead the dough with the soul and with your hands. Go to the market and choose stocks to invest in.
But first I’ll give you the recipe based on the finest ingredients from Peter Lynch. I hope you will like it and, perhaps, in the future will push you to become a chef of your financial cuisine.
1. Each of us is smart enough to make money on the stock market. But not everyone has enough endurance. If you are prone to panic selling, you’d better avoid both stocks and mutual funds (we have mutual funds – mutual Funds).
2. The stock market is not a gamble, provided that you choose good companies that you think will work effectively and not just come from the stock price.
3. Beware of companies with growth rates of 50-100% per year. Investments in risky companies almost never pay off. Look for small companies that have achieved profitability and proven the ability to reproduce their formula for success.
4. Make a clear idea of what you are investing in and why, and state the reasons why the shares of a company should be held. Considerations like “This action will grow, how to drink to give!” they don’t pass through here. Shooting at random, you almost always miss.
5. Never invest in a company if you do not know its financial condition. It is firms with a bad financial situation that lead to record losses. If you can’t find companies that you find attractive, put the money in the Bank until you find them.
6. Never fall in love with the action. Always think objectively and without bias.
7. Avoid popular companies of the most popular industries. It is better to skip the first wave of interest in shares (meaning IPO – initial placement of shares on the market) and make sure that the company’s plans work.
8. Invest in a few stocks because out of every five stocks you choose, one will be excellent, one will be very bad and three will be good.
9. Shares, like children, should not have more than you are able to handle. If investing isn’t your main job, you’ll probably have enough time to keep track of 8-12 companies buying and selling when there’s reason to do so.
10. Do not speculate on stocks. Take your savings, put them in good stocks and hold until they rise in price, then sell. And if they do not grow, then do not buy.
11. Do not sell shares until the company’s fundamentals deteriorate (dividend yield, earnings per share, the ratio of earnings per share to its market price, the value of net assets per share, risk indicators). Otherwise, your only hope is Paul Getty’s formula for financial success: “get up Early, work hard, get rich.”
12. The “bearish” argument always sounds smarter (meaning the probability of the market falling, the share price falling). You can find compelling reasons to sell stocks in every morning newspaper or in every evening news release.”
If you suddenly feel that you woke up an investor, and you irresistibly drawn to the stock market, in these books by Peter Lynch you will find everything you need to find profitable shares for investment:
1) “Peter Lynch Method. Strategy and tactics of an individual investor“
2) “Beat wall street“