TNG reviews Peter Lynch

Something I discovered a little later in life than I would have preferred: the power of learning and continually engaging one’s mind with new information.  Sounds silly, but if you’re not making a habit to better yourself what’s the difference between you and a hermit living in the woods?  What are the chances of achieving your dreams in whatever it is you want to do, bar living a sustainable lifestyle in a woodland environment (but even then!), if you didn’t learn from others?  Books are an invaluable resource you can use to improve yourself.  Someone has already done the hard work.  Take advantage of that.  Leverage it.

Throughout university I was led to believe that the books I should be reading to prep myself for getting a job were Liar’s PokerFreakonomicsBlack Swan, among others.  Don’t get me wrong, great books, very smart authors.  But you are better off leaving these for a holiday.  They’re entertaining but they won’t teach you anything of practical use.

A great part of my life has been dedicated to following the stock market and learning how to invest.  The first time I put actual money on the table I went all-in.  It took losing a lot of that money to realise that this was a mug’s game – at least the way I was doing it.  My approach involved scanning the daily movers and shakers, and trading on momentum.  Technical analysis… I have yet to come across anyone who actually uses this successfully to generate consistent growth in their portfolio.  As I would later discover, none of the greats used it.  Who are the greats?  Black swans some call them.  Yeah those exist I’m sure.  But my new hero, Peter Lynch, is no black swan.  At least his approach isn’t.  Ever hear the mantra: “Invest in what you know”?  This is Lynch.  He coined that phrase.

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One Up on Wall Street by Peter Lynch may look like it was born in the 80s.  And along with Mr. Lynch’s fantastic suit on the cover, its title may draw a few laughs.  But the principles you will take from it are timeless and of great value.

Read this book if you have limited knowledge on investing; read it if you consider yourself to be pretty well read on the topic; read it if you have no clue.  It is applicable to all levels. And for all those looking to get a job in this industry, it will set you up well for answering that very popular interview question: “If I gave you £100,000 where would you invest it and why?”.  This book will embed in you sound investing principles, which you will lean on throughout your life and/or your career.  And Lynch is a great writer to boot.  He cuts straight to the point and doesn’t dance around the subject only to keep you chasing the plot – every succinct chapter is a standalone lesson in itself.

Aspects of the book that made the greatest impact on me:

  • Value-investing in nut-and-bolt industries;
  • How to categorise companies and analyse them (slow growers, stalwarts, fast growers, turnarounds, asset plays and cyclicals);
  • How to phone up a company and what questions to ask (no, really);
  • The best time to buy and sell;
  • How to confront financial statements and what key data to look for;
  • Why futures and options are for farmers and not investors;
  • And of course, what the title of the book itself is alluding to, how working on Wall Street can put you at a disadvantage to the individual investor.

What this book won’t tell you:

  • What companies to invest in and when (what book could do that?);
  • Quantitative analysis (boooring);
  • How to get rich quick (go away).

I love the idea of investing long-term, but it still scares me – after losing so much.  Reading this book added a good few levels to my confidence and really helped affirm my understanding of what I previously knew about but hadn’t really fully grasped.  Lynch accomplishes this with his down-to-earth writing style – love his wit – and an arsenal of real world examples he uses to illustrate his points.  A must-have for any collection.

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