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Peter Lynch Quotes of the Day



October 31, 2013 – Comments (0)

"A lot of people think long-term investing is three weeks from next Wednesday, but when I talk about long-term investing I mean 5, 10, 20 years. During that length of time the market can experience ups and downs due to what I call "background noise." Events occur – hurricanes, wars, political instability, currency and bank crises – that make investors nervous and cause market volatility. It does get nasty at times, but it shouldn't cloud investors' judgments about thinking long-term. The key organ here is your stomach. Everyone has the brainpower, but not everyone has the stomach for it." ~ Peter Lynch

Staying focused over the long haul is easier said than done when it comes to investing in individual stocks. Numerous stocks are pushing all-time highs, and a correction will inevitably come about at some point (when, or how severe, is all speculation). In the midst of market volatility, Peter Lynch urges investors to see a stock not as lottery ticket, but as ownership in a business.  

My application of this strategy is pretty simple, inspired by Lynch and the Fool's own TMF1000. If I see a superior business trading at a reasonable level, and have cash available, I open an intial position in the business. In the meantime, I add cash to my portfolio as time (and my ginormous college wage) allows. Should the market correct, I will reevaluate my holdings to identify which superior businesses are placed on the discount shelf thanks to Mr. Market. Stock market corrections are the friend of long-term investors.

"Time is on your side when you own shares of superior companies." ~ Peter Lynch   

My rule of thumb follows what investing greats, such as Lynch and Warren Buffett, encourage: any money invested in stocks should be money you can reasonably do without for at least ten years. Invest an amount you are comfortable with (and could stomach to see in the red), and consider the possibility of purchasing (or reinvesting in) quality businesses that get unnecessarily hammered by the market. 

"The bottom line is to have a responsible plan for your investments and know what you own and why you own it. There's too much at stake not to." ~ Peter Lynch 

Whatever might be ahead for the market, keep focused on the businesses behind the stocks, invest responsibly and, most importantly, stay Foolish.

David K  

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