Peter Lynch is one of the most successful and well-known investors of all time. Learn how to improve your trading with the best Peter Lynch quotes.
Lynch is the legendary former manager of the Magellan Fund at the major investment brokerage Fidelity.
He took over the fund in 1977 at age 33 and ran it for 13 years.
The fund earned an annualized return of 29.2% during his time running it, more than twice what the S&P 500 earned during that time.
Peter’s investment style is called adaptive to the prevailing economic environment at the time, but Lynch always stressed that you should be able to understand the companies that you own.
As always it is great to be able to learn from the best investor and see what you can incorporate in your own strategy.
I’ve collected the best of Peter Lynch quotes and trading rules for you.
For each quote I explain a little better what you should learn from it.
And a picture is worth more than thousand words; so I created clear visuals for each of Peter Lynch’ quotes as well.
Let’s start with the best Peter Lynch quotes and trading rules:
“There’s no shame in losing money on a stock. Everybody does it. What is shameful is to hold on to a stock, or worse, to buy more of it when the fundamentals are deteriorating.”
Losing money is a big part of becoming a successful trader. Peter mentions in another quote as well, here he points out that you should always know the underlying company of any stock you trade. And if the fundamentals of that company are deteriorating you should not buy into it. Off course there are companies that can still be a good trade without strong fundamentals, but the super performance stocks always have stellar fundamentals.
“Behind every stock is a company. Find out what it is doing.”
I think this is one of the best quotes of Peter Lynch. And this one really focusses on his strategy. Peter always invested in the underlying company and not only the traded stock price. Even if a stock chart looks appealing to you to trade make sure you always find out what the company itself is doing. Go do your research and learn about the company and it’s fundamentals.
“Owning stocks is like having children, don’t get involved with more than you can handle.”
Some traders look to diversify their portfolio into as much stocks as possible, the best traders call this an insurance against ignorance. If you learn to focus on the best performing stocks you don’t need to own a lot, you want to be concentrated in the best stocks. If you hold too much stocks you can’t keep up with any unexpected news that might impact your position. Stay within your circle of competence, also with the amount of holdings at one time.
“If you don’t study any companies, you will have the same success buying stocks as you do in a poker game, if you bet without looking at your cards.”
A great analogy for doing your homework on the stocks you want to buy. If you don’t do any research it is like playing a game without looking at your cards, in other words; you have know idea what you are really doing and how to handle your position.
“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.”
Peter explains why investing should not be looked at as a difficult endeavor. Off course it is hard work to become successful, but by doing your homework and put in time and effort you can become as successful as the professionals. Especially in the selection of winning stocks you can do that by good research. All other parts like risk management and sell rules that will make you profitable in the long run needs study as well off course.
“You have to keep your priorities straight if you plan to do well in stocks.”
One of the biggest impact on your success as a stock trader will be your mindset and how you handle your priorities. Learn how to keep your mind clear and work with a proven rules-based strategy. And handle your priorities correctly by sticking to your actions that you defined in your strategy.
“Investing in stocks is an art, not a science, and people who’ve been trained to rigidly quantify everything have a big disadvantage.”
This quote from Peter Lynch goes into the difference between amateur investors and professionally trained Wall Street guys. By defining that the professionally trained do not always have an advantage over the clear-thinking amateur that studies stocks in his own time. The quantification of all corporate numbers is not an edge that guides you to the best performing stocks.
“All the math you need in the stock market you get in the fourth grade.”
Another notion from Peter that the average guy, or girl, is smart enough to become a successful investor as well. You don’t need to have a special degree for it. The main thing you do need is the motivation to go for it and learn along the way.
“Time is on your side when you own share of superior companies.”
A great quote that emphasizes on letting your winners run. Don’t be too eager to take profit when a trade is going strong in your direction. The real super performance stocks took months to years to make the biggest gains. Learn to sit on your hands and let your profits grow.
“The worst thing you can do is invest in companies you know nothing about.”
Don’t ever be tempted to invest in any company that you know nothing about. When a stock looks interesting always do a quick research to at least find out in what business it is in. Preferably – and more importantly – it is better to do your due diligence correctly and really research the company.
“If you can follow only one bit of data, follow the earnings. 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.”
The essential fundamentals to look at for any company are it’s earnings. When a company earns money that is a good sign. When those earnings are growing rapidly each quarter and year it is an even stronger sign. The best performing stocks all have amazing earnings growth rates.
“All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out.”
If you use good risk management to cut your losers short before those become big losses than all you need to have are a few big winners to make real money. And you need to position a good portion of your portfolio in the big winners for a real impact on your account size. There is no need to try to be profitable on every trade, because you can’t. But also don’t take profit to quick after a break-out, learn to let your winners ride.
“In business, competition is never as healthy as total domination.”
Super performance stocks are often the market leaders is any group. Being the best company is a great find for a good trade, but what will happen when a company has no competition? In other words, it dominates that market. Because it is the only player and nobody is able to provide that same product or service to their customers.
“Know what you own, and know why you own it.”
Again Peter Lynch focuses on knowing the company that you own by doing your research. But in this quote he mentions knowing why you own it as well. Be aware on the reason why you thought it was a good trade when you bought it. More importantly keep doing your homework to find out if that thesis is staying valid. And the moment it changes that is probably the best time to take your profit or cut your losses.
“In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”
This is a tough thing to really comprehend for new traders. You need to learn to admit that you are going to be wrong in a lot of trades. Put your pride and ego aside and recognize that you will be wrong in a lot of trades. The key in becoming a successful trader is losing little money on those trades and making big money on your winning trades.
“That’s not to say there’s no such thing as an overvalued market, but there’s no point worrying about it.”
This is a great quote that seems to be more accurate as ever in the current money printing environment that pushes stocks higher and higher. Is the market overvalued? Who knows, and who cares? The thing to care about is that the stocks you own are going higher. If that is the case, than you’re still doing fine.
“The natural-born investor is a myth.”
Nobody is a born investor or trader. To become successful in the stock market you need to put in time and effort to learn it. You need to learn how and what to buy and when to sell. But also managing risk correctly and how to handle your mindset. Every successful trader has worked really hard to get where they’re now.
“The simpler it is, the better I like it.”
This is true for companies as for charts as well. If a company is simply being great at delivering one product that can be an amazing trade. As you look into bigger companies that do a lot of stuff it is much harder to grasp the true nature of it and determine it’s future as a trade. And with charting you don’t want to clutter your chart with a lot of indicators, use a few good ones to really help you and leave out the rest.
“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.”
Successful trading is not a gut feeling business, it is a rules-based profession. Discipline yourself to determine a working and tested strategy and even more important is to stick to your strategy over time. Even in times where it seems to be making not enough money. If you did your back-testing correctly then you don’t need to switch to something else. Stick to what works.
“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.”
A big part of trading is being wrong. A lot of trades will not go in the direction that you want. In the beginning you are going to argue with the market to try to prove you were right. That is going to cost you a lot of money. The moment you accept you can’t dictate the market and stock direction, but you can only dictate how you anticipate on it’s moves you will become successful.
“Big companies have small moves, small companies have big moves.”
Most of the super performance stocks that will impact the growth of your account will be smaller companies. Those will have bigger price moves when more interest and money is flowing into them. The bigger the company, the more buying power is needed to make any move. So one new interested institution will not have enough buying power to do that in a big company, but in a small company they have that power.
“Remember, things are never clear until it’s too late.”
Trading with hindsight is easy. Looking back at the big winning stocks and find the perfect buy point is easy. Everybody can point out where it has started it’s big move. But not everybody can determine the ideal buy point before that big move is going to happen. And that is true for big runs higher, as for big drops lower. You need to learn how to handle those situations before they really occur.
“Find something you enjoy doing and give it everything you’ve got, and the money will take care of itself.”
Peter Lynch hits the nail on it’s head with this quote. The most important thing in life is doing something that you enjoy doing. That will make putting in the time a lot easier. And you need to put in a lot of time to practice to become competent in anything. Money is secondary, and should never be your focus. But if you focus on becoming great in something you love, it will come to you.
Let me know which of these Peter Lynch Quotes resonates best with you!
And what quote from Peter Lynch did I miss that you think should be in here as well?