14 Advice from Peter Lynch Investment Securities

Here are some investment advice from Peter Lynch, one of the best fund managers. This advice is aimed at individual investors. For me, a lot of lessons to be drawn. The advice of Peter Lynch is writing in Worth magazine in 1997. I translate freely as if translated directly would confuse and numb.

1. For each stock we have, continue to follow the story and write in a notebook. Record the latest developments and closely watch earnings. Whether classified as growth stocks stocks, cyclical stocks or value stocks. Performance of good stock or bad there must be a reason. Make sure we know what the reason.
2. Pay attention to the facts, and not a prediction.
3. Ask yourself: how much return we get if you are right and how much potential loss if you are wrong. Look for stocks with the risk-reward ratio of 3 s / d 1 or smaller.
4. Before investing, check the balance sheet to find out whether the company is financially strong.
5. Do not buy options and do not buy on margin. If we buy options, time will become our enemy, and if we buy on margin, the fall of the market will make you bankrupt.
6. When some 'insiders' buy company stock, it is a good thing.
7. Most investors can monitor up to ten five stocks at once, but would not have a necessity to have this amount. If you are more comfortable to have seven shares, bought seven shares. If you like the three stocks, buy three shares. If you feel comfortable to not have a stake, do not buy one.
8. Please be patient. Shares that have given me the maximum advantage, its largest price increase occurred in the third or fourth year since I have it. Some take ten years.
9. Buy early - but not too early. I often analogize investment in 'growth companies' terms in baseball. Try to follow the game in the third inning, as the company has proven its performance in these phases. When we bought before the lineup was announced, we are taking unnecessary risks. We have a lot of time (10-15 years in some cases) between the third inning and seventh inning, in which the stock price could rise 10-50 fold. When we bought in the last inning seemed too late.
10. Do not buy a stock is cheap because it's cheap. Buy them because of improved fundamentals.
11. Buy a small company after they have a chance to make a profit.
12. "Long-shots usually backfire or Become no shots." (Note: this is an expression that buying stocks based on tips from a person's potential to backfire and no benefits for us).
13. If you buy a stock because dividends, make sure that the company is able to deliver the dividends of its profits, even as the economy worsens.
14. Investigation of ten companies and most likely you'll find a company with bright prospects. Investigation of 50 companies and you'll most likely find five companies with bright prospects.