Peter Lynch quotes are a guide all investors should follow. After all, he’s an investment guru who grew the Fidelity Magellan fund from $18 million to $14 billion in thirteen years, solidifying his status as a legend and one of the greatest investors of all time.
Lynch has also authored and co-authored several books. His most notable work includes “Learn to Earn,” “Beating the Street,” and One Up on Wall Street.”
The following are the best Peter Lynch quotes full of investing wisdom and sage advice that can provide investors with the guidance to help to form or hone a successful investment strategy.
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Peter Lynch Quotes
Understand the Companies
Like Warren Buffett, Peter Lynch regularly tells his readers and followers to pick stocks of companies they understand and have thoroughly researched. Lynch has often been quoted as advising “invest in what you know.” If a company uses a technology you don’t understand, what it accomplishes, and how it can serve customers, don’t invest in it.
1. “This is one of the keys to successful investing: focus on the companies, not on the stocks.”
2. “The best way to handle a situation in which you love the company but not the current price is to make a small commitment and then increase it in the next sell-off.”
3. “I’m always on the lookout for great companies in lousy industries. A great industry that’s growing fast, such as computers or medical technology, attracts too much attention and too many competitors.”
4. “Buy only what you understand, believe in, and intend to stick with – even when others are chasing the next miracle. “
5. “The basic story remains simple and never-ending. Stocks aren’t lottery tickets. There’s a company attached to every share.”
Do Your Homework
Lynch preaches that stock price and past performance are not indicative of a good investment. Investors need to focus on the company and its projected growth, how they deliver the products or services they offer, and how fierce the competition is in its industry.
6. “Peter Lynch doesn’t advise you to buy stock in your favorite store just because you like shopping in the store, nor should you buy stock in a manufacturer because it makes your favorite product or a restaurant because you like the food. Liking a store, a product, or a restaurant is a good reason to get interested in a company and put it on your research list, but it’s not enough of a reason to own the stock! Never invest in any company before you’ve done the homework on the company’s earnings prospects, financial condition, competitive position, plans for expansion, and so forth.”
7. “Look for small companies that are already profitable and have proven that their concept can be replicated. Be suspicious of companies with growth rates of 50 to 100 percent a year.”
8. “If the P/E of Coca-Cola is 15, you’d expect the company to be growing at about 15 percent a year, etc. But if the P/E ratio is less than the growth rate, you may have found yourself a bargain. A company, say, with a growth rate of 12 percent a year (also known as a “12-percent grower”) and a P/E ratio of 6 is a very attractive prospect.”
9. “Investing without research is like playing stud poker and never looking at the cards. For some reason the whole business”
10. “Never invest in a company without understanding its finances. The biggest losses in stocks come from companies with poor balance sheets.”
11. “Whenever you invest in any company, you’re looking for its market cap to rise. This can’t happen unless buyers are paying higher prices for the shares, making your investment more valuable.”
12. “If you can follow only one bit of data, follow the earnings.”
Be Patient and Hold Stocks Long-Term
Lynch believes people should invest in stocks with a commitment to hold them long-term. Volatility is an inherent part of the stock market, and as long as the companies behind the stocks are still solid performers, investors shouldn’t consider selling. If the stock of a good company drops in price, it’s an excellent opportunity to buy more if the fundamentals are still sound.
13. “The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them. Stand by your stocks as long as the fundamental story of the company hasn’t changed.”
14. “People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.”
15. “If you can follow only one bit of data, follow the earnings—assuming the company in question has earnings. As you’ll see in this text, I subscribe to the crusty notion that sooner or later earnings make or break an investment in equities. What the stock price does today, tomorrow, or next week is only a distraction.”
16. “A successful stock picker has the same relationship with a drop in the market as a Minnesotan has with freezing weather. You know it’s coming, and you’re ready to ride it out, and when your favorite stocks go down with the rest, you jump at the chance to buy more.”
17. “But my system for over 30 years has been this: When stocks are attractive, you buy them. Sure, they can go lower. I’ve bought stocks at $12 that went to $2, but then they later went to $30.”
Just Good Advice
The following are a few more Peter Lynch golden nuggets of wisdom on investing, such as only buying what you can manage, only investing money you can live without, and when you should consider selling a stock.
18. “It’s best to divide your money among three or four types of stock funds (growth, value, emerging growth, etc.) so you’ll always have some money invested in the most profitable sector of the market.”
19. “By now you might be wondering what’s the point of investing in a stodgy old company such as IBM, GM, or U.S. Steel? There are several reasons you might do this. First, big companies are less risky, in that they generally are in no danger of going out of business. Second, they are likely to pay a dividend. Third, they have valuable assets that might be sold off at a profit.”
20. “Only invest what you could afford to lose without that loss having any effect on your daily life in the foreseeable future.”
21. “One obvious sell signal is that inventories are building up and the company can’t get rid of them, which means lower prices and lower profits down the road. I always pay attention to rising inventories. When the parking lot is full of ingots, it’s certainly time to sell the cyclical. In fact, you may be a little late.”
22. “Owning stocks is like having children – don’t get involved with more than you can handle.”
23. “Average investors can become experts in their own field and can pick winning stocks as effectively as Wall Street professionals by doing just a little research.”
24. “Don’t buy ‘cheap’ stocks just because they’re cheap. Buy them because the fundamentals are improving.”
25 “You only need a few good stocks in your lifetime. I mean how many times do you need a stock to go up ten-fold to make a lot of money? Not a lot.”
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Final Thoughts on 25 Peter Lynch Quotes You Must Read Before Buying Stocks
These Peter Lynch quotes are packed with helpful information like what to look for in a good stock pick and how to invest wisely. Lynch advises investors to buy stock in excellent companies that they have thoroughly researched and to hold them long-term. Like Warren Buffett’s investment philosophy, Lynch believes patient investors will be rewarded over time for investing in good companies with a strong financial outlook.
You can also read 20 John Bogle Quotes to Guide Your Investment Strategy by the same author.
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Nadia Tahir is a freelance writer and content creator. She mostly writes in the areas of lifestyle and personal finance. She also enjoys writing on her blog about motherhood at This Mom is On Fire.