👉️ Peter Lynch: 20 Golden Rules of Investing 📈 

👉️ Tweet of the Week: 6 Rules for Long-Term Investors 💸 

👉️ Game Changer: This One Tool Changed The Way I Invest My Money 💰️ 

Peter Lynch - 20 Golden Rules

Peter Lynch is one of the most successful and well-known investors on the face of the Earth.

He is most famously known as being the former manager of the Magellan Fund at the brokerage Fidelity.

In 1977, Peter Lynch took over the fund at age 33 and ran it for 13 years, where he earned an annualized return of 29.2%, more than twice what the S&P 500 earned during that time.

His success allowed him to retire at the age of 46.

Here is a collection of his most important investing rules, based on his books One Up on Wall Street and Beating the Street.

Peter Lynch's 20 Golden Rules of Investing:

Invest in What You Know
Look for investment opportunities in industries or companies you understand. If you don’t know how the business makes money, you shouldn’t buy it.

Do Your Homework
Research and understand the company's fundamentals, products, and competitive advantages before investing. Never blindly invest in a company because a friend told you it’s a good idea. Make sure you understand the full picture before investing your hard-earned money.

Know Why You Own a Stock
Be clear on your reasons for investing and what you expect to achieve. If you can’t explain to a 10-year-old why you’re investing in a company, you shouldn’t be investing in it.

Avoid Hot Tips
Don't invest based on rumours, tips, or trends that you haven't researched yourself. The majority of investors want to get rich overnight and with that desire comes blindly following “hot tips” that may fit in the box of your investing strategy.

Be Patient
Successful investing takes time. The stock market rewards the patient and consistent investor. Once you learn how to play the game, investing becomes easy.

Focus on Companies, Not Markets
Ignore short-term market fluctuations and concentrate on finding solid businesses. A high quality company will prevail even when market conditions are against them.

Don’t Try to Time the Market
Predicting market movements is nearly impossible. Remember: Time IN the market beats TIMING the market. If someone says they can time the market, they’re lying to you.

Understand the Story
Know the company’s growth story, management, and future prospects. This relates to “investing in what you know”. If you don’t understand how the company makes money, who their customers are and what plan they have to expand the business, then that company shouldn’t be in your portfolio.

Look for "Tenbaggers"
A "tenbagger" is a stock that grows to be worth 10 times its initial purchase price. You only need 2 or 3 of these to build massive amounts of wealth. These are typically smaller cap companies with large runways for growth. Be careful as investing in small cap companies comes with higher risks and price volatility.

Diversify Wisely
Own enough stocks to spread risk but not so many that you can't follow them all. If you’re investing in individual stocks, it’s your responsibility to keep up with market news, earnings and valuations. Diversifying is great, but over-diversification exists too.

I wrote a post on over-diversification, A.K.A “diworsification”. You can read it below:

Buy What You Believe In
Invest in companies whose products or services you use and appreciate. Look around you. What do you use on a daily basis? What could you not live without? Chances are there are millions of others who feel the same way. These are the companies that will keep growing no matter what the markets are doing because demand will always be there.

Look for Growth at a Reasonable Price (GARP)
Invest in companies with solid growth prospects but avoid overpaying for them. I’m sure you’ve heard that the U.S. markets are extremely overvalued right now. It’s important to understand the fundamentals of the company so that you can determine a fair price.

Check the Balance Sheet
Strong financials and low debt are signs of a healthy company. Here’s a great video on how to learn how to read balance sheets.

Beware of Overhyped Stocks
Stocks with excessive media attention or unrealistic expectations often underperform in the long run. By the time you’ve heard of a company, it’s probably too late to invest in it. Don’t chase the hype and stay in your lane.

Keep a Long-Term Perspective
Stocks are for long-term growth, not short-term speculation. Keep your eye on the light at the end of the tunnel. The stock market rewards the long term investor.

Use Common Sense
If something about a company doesn't make sense, stay away from it. Investing isn’t just black and white. Sometimes you have to ask yourself “Does this investment make sense?”.

Or does cutting the tree like this make sense? Surely not…

Learn from Mistakes
Every investor makes mistakes. Use them as learning opportunities to improve. I’ve made countless mistakes that have cost me thousands of dollars. The great part is that I made these mistakes with small money, so they were less expensive. If you can’t manage $1,000, you won’t be able to manage $100,000. Make your mistakes early on and take those lessons with you throughout the rest of your investing journey.

Don’t Panic Sell
Hold through market downturns if the company’s fundamentals remain strong. Too many investors panic and sell the second the market starts pulling back. There’s always a reason to sell, but if the fundamentals remain and you still believe in the long term growth of the company, don’t sell.

Avoid Over-diversification
Owning too many stocks can dilute returns and make it harder to track performance. You can read more about this here.

Stay Within Your Circle of Competence
Stick to industries or businesses you understand well. When it comes to investing, venturing off into the unknown is often a bad strategy.

Alex (The Dividend Dominator)
Founder and CEO of Dividend Domination Inc.
Follow me on Twitter, Instagram and LinkedIn

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