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Wednesday, June 11, 2014

Peter Lynch: What’s So Special About This Market Maven?

LEARN FROM THE GENERALS OF THE MARKETS - PART 49

“Over the years I have benefitted from many traders (alive and dead), investors and professionals.” – Alan Saunders 

Born in January 19, 1944, in Newton, Massachusetts, USA. Peter Lynch is considered to be one of the greatest investors around.  He studied at Boston College (1965) and bagged his MBA from the Wharton School of the University of Pennsylvania (1968). 

In 1966, he started working at Fidelity Investments. He began to keep tabs on key industries and eventually became the firm’s director. He later became head of Magellan Fund which was worth $18,000,000 (1977). That portfolio had been increased to over $14,000,000,000 by the time he stopped managing the fund in 1990.  From 1977 to 1990, he was making about 29.2% per annum. He beat the S&P 500 Index benchmark many times. In mutual funds, he emerged as the best earners of return in 2003. Indeed, his stakes on popular stocks have paid off and he’s considered a legendary trader.

He’s co-authored best sellers: “One Up on Wall Street”, “Beating the Street,” and “Learn to Earn.” The books are indeed a great help to anyone who wishes to attain success in the markets. He wrote many premium articles for Worth magazine.

Peter Lynch is a philanthropist who’s donated huge amounts of money to causes he believes in.

Lessons
These are the lessons that can be learned from Peter:

  1. An individual trader is capable of making more money than professional traders, like Richard Dennis’ Turtles and Lex van Dam’s BBC Million Dollar traders were able to demonstrate. Your simple trading idea can make you rich in future. 

  1. Sometimes, it pays to employ a flexible investment style that adapts to changing market conditions. That’s what Peter did. 

  1. Predicting future market conditions is like flogging a dead horse. It just won’t work. Just try to capitalize on your gains and truncate your losses. If you wanted to predict the future, you might want to flip a coin to do that. In addition, if you can make extensive research, you’re bound to sight great trading opportunities.

  1. Enter good trades and manage your positions well. It’s sensible to have valid reasons for opening trades. Peter was a position trader who was not affected by transient market noises.

  1. Peter said there’ll always be something to worry about, and that’s enough. Good traders have conquered their ego before they conquer the markets. We need to be humble enough to learn from our mistakes.

  1. Open only trades that you can handle. Too many trades with big position sizes can make you lose control.

  1. Looking for 90% accuracy in the market is far-fetched, but skilled traders can achieve about 60% accuracy. There’s no perfect outcome in trading and if you don’t want to see any minus in your trades, you’re already a flop. Profitable trading is realized when losses are dealt with triumphantly.

  1. You don’t need a PhD in math before you can be a great trader. An elementary school math is Ok for you to deal with the markets.

  1. No-one is born with trading skills. The skills are only acquired thru hard work and self-control. Yes, trading is a skill you can learn and master.

  1. The best trading approach is the simplest trading approach. Many market wizards use simple strategies and Peter is one of them. An easy trading approach would cause you to make the least amount of mistakes, whereas hard trading systems would cause you to fall into many errors. Simple trading systems are easier to understand and use in making good choices.

Conclusion: Nowadays, speculation proffers chances of harnessing gains, but you need a working trading method to locate high-flying instruments. It may be difficult while trying to wait until you see your preferred setups, but as a speculator you need to accept that, for it’s been proven that patience is rewarding.

This article is concluded with a quote from Peter:

"Investing without research is like playing stud poker and never looking at the cards… If you stay half-alert, you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall, and long before Wall Street discovers them."




Learn from the Generals of the Markets: Market Generals

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