One Up On Wall Street: How To Use What You Already Know To Make Money In

by Peter Lynch

August of 1998 brought the S&P 500 down 14.5 percent, the second worst month since World War II. Nine months later stocks were off and running again, with the S&P 500 up more than 50 percent!

“That’s not to say there’s no such thing as an overvalued market, but there’s no point worrying about it.”

too, bought into The Limited when the story got popular and the fundamentals had begun to deteriorate, and I’m still holding on at a loss.

Why wait for the Merrill Lynch restaurant expert to recommend Dunkin’ Donuts when you’ve already seen eight new franchises opening up in your area?

Finding the promising company is only the first step.

Not only that, he was one of the first to take advantage of the fact that the Japanese Dow Jones (the Nikkei average) is up seventeenfold from 1966 to 1988, while the U.S. Dow Jones has only doubled.

The secret of his success is that he never went to business school—imagine all the lessons he never had to unlearn.

if a stock is down but the fundamentals are positive, it’s best to hold on and even better to buy more.)

If IBM goes bad and you bought it, the clients and the bosses will ask: “What’s wrong with that damn IBM lately?” But if La Quinta Motor Inns goes bad, they’ll ask: “What’s wrong with you?” That’s why security-conscious portfolio managers don’t buy

In spite of crashes, depressions, wars, recessions, ten different presidential administrations, and numerous changes in skirt lengths, stocks in general have paid off fifteen times as well as corporate bonds, and well over thirty times better than Treasury bills!

In stocks you’ve got the company’s growth on your side. You’re a partner in a prosperous and expanding business. In bonds, you’re nothing more than the nearest source of spare change. When you lend money to somebody, the best you can hope for is to get it back, plus interest.

Buy the right stocks at the wrong price at the wrong time and you’ll suffer great losses.

But with the possible exception of the very short-term bonds and bond funds, bonds can be risky, too. Here, rising interest rates will force you to accept one of two unpleasant choices: suffer with the low yield until the bonds mature, or sell the bonds at a substantial discount to face value.

The customary progression in houses is as follows: You buy a small house (a starter house), then a medium-sized house, then a larger house that eventually you don’t need. After the children have moved away, then you sell the big house and revert to a smaller house, making a sizable profit in the transition.

Unlike stocks, houses are likely to be owned by the same person for a number of years—seven, I think, is the average.