Investment adviser and author Peter Lynch is credited with the 1990s Wall Street adage “Invest in what you know.” The phrase issometimes made to rhyme at the beginning and at the end: “Invest in what you know best.”
The philosophy of “invest in what you know” is not new and is similar to advice in other disciplines. Writers are often told to “write what you know” or to “go with what you know.”
Wikipedia: Peter Lynch
Peter Lynch (born January 19, 1944) is a Wall Street stock investor. He is currently a research consultant at Fidelity Investments. Lynch graduated from Boston College and earned a Master of Business Administration from the Wharton School of the University of Pennsylvania. He is not related to Edmund C. Lynch, the co-founder of Merrill Lynch.
Lynch coined some of the best known mantras of modern individual investing strategies.
His most famous investment principle is simply, “Invest in what you know,” popularizing the economic concept of “local knowledge”. This simple principle resonates well with average non-professional investors who don’t have time to learn complicated quantitative stock measures or read lengthy financial reports. Since most people tend to become expert in certain fields, applying this basic “invest in what you know” principle helps individual investors find good undervalued stocks.
30 September 1985, Oelwein (Iowa) Daily Register, “Bono’s Astro-Vue” by Lillian Bono, pg. 7, col. 5:
(Dec. 22-Jan. 20)
This is not a good time to try experimenting with the stock market. Either invest in what you know, or wait for something that looks safe.
15 September 1993, San Jose (CA) Mercury News, “401(K)’s potential as powerful retirement tool is often untapped” by Mark Schwanhausser, pg. 3H:
Perhaps following the advice to invest in what you know best, many employees bulk up on their company’s stock. Be careful the company stock doesn’t ...
Beating the Street:
The Best-Selling Author of One Up on Wall Street Shows You How to Pick Winning Stocks and Develop a Strategy for Mutual Funds
By Peter Lynch with John Rothschild
New York, NY: Simon and Schuster
Buying what you know about is a very sophisticated strategy that many professionals have neglected to put into practice.
9 August 1998, New York (NY) Times, “A Model Career Path For a Self-Starter” by Laura Pedersen-Pietersen, pg. BU12:
While he had never heard of Peter Lynch, the legendary portfolio manager for Fidelity Investments, he approached the market as if he had memorized a page out of Mr. Lynch’s playbook: Invest in what you know.
Stock Market Rules:
70 of the Most Widely Held Investment Axioms Explained, Examined, and Exposed
By Michael D. Sheimo
Published by McGraw-Hill Professional
Invest in What You Know Best
Investing in Hedge Funds:
Strategies for the New Marketplace
By Joseph G. Nicholas
Published by Bloomberg Press
“INVEST IN WHAT YOU KNOW” has been a popular mantra of many investment gurus for decades.
28 July 1999, New York (NY) Times “Investing Strategies GOlden in the 90’s May Be Weakening” by Gretchen Morgenson, pg. C12:
The invest-in-what-you know thesis that investors have thronged to was made famous by Peter Lynch, the extraordinary manager that brought fame to Fidelity’s Magellan Fund in the 1980’s.
If You’re Clueless about the Stock Market and Want to Know More:
By Seth Godin
Published by Kaplan Publishing
To borrow from Peter Lynch, one great way to find fundamentally sound companies is to invest in what you know. Lynch is a great advocate of what might be called the intelligent and observant consumer. According to Mr. Lynch, the average person has an advantage over even the most savvy and tuned-in Wall Street analyst, because the average person can spot trends in businesses before Wall Street even gets wind of their existence.
Stock Market Wizards:
Interviews with America’s Top Stock Traders
By Jack D. Schwager
New York, NY: HarperCollins
The gist of Lynch’s advice to the ordinary investor is: Invest in what you know — the company you work for (assuming it is doing well), companies in the same industry, or companies that make a product you can touch and feel. His point is that people would be much better off investing in companies they understand than listening to their broker and investing in companies they know nothing about. One part of Peter Lynch’s philosophy is that if you can’t summarize the reasons why you own a stock in four sentences, you probably shouldn’t own it.
Investing in Vice:
The Recession-Proof Portfolio of Booze, Bets, Bombs, and Butts
By Dan Ahrens
New York, NY: Macmillan
Invest in What You Know
Jim Cramer’s Mad Money:
Watch TV, Get Rich
By James J. Cramer and Cliff Mason
New York, NY: Simon and Schuster
I’m fixed on this point because there will always be some temptation to base your stock judgments entirely on your interactions with companies in your everyday life. The legendary Peter Lynch popularized this style of investing: “invest in what you know.”
New York City • Banking/Finance/Insurance • (0) Comments • Tuesday, October 14, 2008 • Permalink