Notes to BEATING THE STREET
By : Peter Lynch with John Rothchild
1.
Never invest in any idea you can't illustrate with a crayon.
2.
You can lose money in a very short time but it takes a long time to make money.
3.
The stock market really isn't a gamble, as long as you pick good companies that
you think will do well, and not just because of the stock price.
4.
You can make a lot of money from the stock market, but then again you can also
lose money, as we proved.
5.
You should invest in several stocks because out of every five you pick one will
be very great, one will be really bad, and three will be OK.
6.
Just because a stock goes down doesn't mean it can't go lower.
7.
You should not buy a stock because it's cheap but because you know a lot about
it.
8.
Hold only those stocks on which you can remain informed.
9.
Invest regularly.
10.
The key to making money in stocks is not to get scared out of them. This point cannot be overemphasized.
11.
A decline in stocks is not a surprising event; it's a recurring event ‑
as normal as frigid air in Minnesota.
If you live in a cold climate, you expect freezing temperatures, so when
your outdoor thermometer drops below zero, you don't think of this as the
beginning of the next Ice Age. You put
on your parka, throw salt on the walk, and remind yourself that by summertime
it will be warm outside.
12.
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.
13.
Historically, stocks return nearly 11 percent.
14.
Warren Buffet’s admonition that people who can't tolerate seeing their stocks
lose 50 percent of their value shouldn't own stocks also applies to stock
funds.
15.
People who can't tolerate seeing their mutual funds lose 20‑30 percent of
their value in short order certainly shouldn't be invested in growth funds or
general equity funds.
16.
When stocks in good companies are selling at 3‑6 time’s earnings, the
stock picker can hardly lose.
17.
A sure cure for taking a stock for granted is a big drop in the price.
18.
Ergo, the devoted stock picker is happier when the market drops 300 points than
when it rises the same amount.
19.
If you like the store, chances are you'll love the stock.
20.
Peters Principle #18: When even the
analysts are bored, it's time to start buying.
21.
It is a wonderful thing for shareholders when a utility builds a new plant (one
that get a license to operate, at least) or takes other steps to increase
capacity. When capacity grows, so does
the rate base, and so do the earnings.
22.
A healthy portfolio requires a regular checkup‑perhaps every six months
or so.
23.
Long shots almost always miss the mark.
24.
Owning stocks is like having children ‑ don't get involved with more than
you can handle. There don't have to be more than 5 companies in the portfolio
at any one time.
25.
If you can't find any companies that you think are attractive, put your money
in the bank until you discover some.
26.
Avoid hot stocks in hot industries.
27.
A stock‑market decline is as routine as a January blizzard in
Colorado. If you're prepared, it can't
hurt you. A decline is a great
opportunity to pick up the bargains left behind by investors who are fleeing
the storm in panic.
28.
Nobody can predict interest rates, the future direction of the economy, or the
stock market. Dismiss all such
forecasts and concentrate on what's actually happening to the companies in
which you’ve invested.
29. If you don't study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
30. Equity to Assets
ratio discussion. The higher the E/A, the better. E/A of 5.5 to 6 is average.
S&L, he likes to see E/A of at least 7.5.
31. 6 month check up as a
reminder. Two Basic questions of 6 month check up.
A. Is
the stock still attractively priced relative to earnings?
B. What
is happening in the company to make the earnings go up.