Lynch’s 25 nuggets
1. Investing is fun, exciting and, if you don’t do any work, dangerous.
2. You can outperform the experts if you invest in companies you understand.
3. You can beat the market by ignoring the herd.
4. Find out what the company behind a share is doing.
5. Often, and for long periods, company performance can remain disconnected from its share price performance. Long term, there is correlation and the temporary disparity is the key to investment success. It pays to own successful companies, with patience.
6. You have to know what you own, and why you own it.
7. Long shots mostly miss the mark.
8. There needn’t be more than five companies in a portfolio. A part-time share picker has time to follow roughly eight to twelve companies.
9. If there are no attractive companies, put your money in the bank until you find some.
10. Never invest in a company without understanding its finances, particularly the balance sheet.
11. Avoid hot shares in hot industries. Great companies in cold industries are consistent winners.
12. Wait until a company turns a profit before you invest.
13. Wait for troubled industries to show signs of recovery before investing in them. Even then, pick resilient companies and be aware that some industries never do recover.
14. It only takes a few big winners to make a lifetime of investing worthwhile. If you invest £1,000 in a share, that’s all you can lose, but you stand to gain multiples of that amount. Don’t diversify that advantage away with too many shares.
15. The observant amateur may discover great growth companies long before the professionals.
16. Stock market declines are common: they are great opportunities to buy bargain shares.
17. Successful investing requires modest brainpower and a strong stomach.
18. Trade shares according to the companies’ fundamentals and not according to wider concerns, as there’s always a source of external worry.
19. Ignore economic predictions and follow what’s happening in the companies you own.
20. There’s always an over-looked company on the stock market, where share prices are undervaluing its prospects. All you have to do is discover it.
21. If you don’t study the companies behind your investments, it’s gambling.
22. Time is on your side when you own shares in great businesses.
23. If you do not have time to invest actively, buy a few share funds with differing strategies.
24. Overseas focused funds can provide access to faster-growing economies.
25. In the long run, a portfolio of well-chosen shares and/or funds will out perform most assets classes. However, a portfolio of badly chosen share investments underperforms cash under the mattress