Wall Street for Everyone

Almost forty years ago, I decided to get involved in the stock market and become a lifelong investor.

Back then, if you were poor, the best way to become "un-poor" was Wall Street. My education in stock picking began when I was only sixteen, and I have pursued this as my life's work for 38 years.

The most famous investor in the world at the time was Fidelity Investment’s manager of their flagship Magellan Fund – Peter Lynch. His 80^th birthday is next week.

Lynch was a Massachusetts native who attended Boston College and then my alma mater, the Wharton School of Business at the University of Pennsylvania. He joined Boston-based Fidelity after graduating and would eventually become the Director of Research.

In 1977, he took over the management of an unknown small mutual fund with just $18 million in funds. Over the next 23 years, he would take that fund – the Magellan Fund – and transform it into the largest mutual fund in the world with an amazing +29.2% annual return. This is considered the best 20-year return of any major mutual fund ever.

Lynch also revolutionized investor access to investing by authoring several books. The first was "One Up On Wall Street," published in 1989, and then "Beating the Street," published in 1993.

Previous books were written about investing, but Lynch opened the idea of fundamental analysis to ordinary investors. Lynch did more to democratize the knowledge of this key investment technique than any other person in history.

There is a reason that his book is at the top of my profile on X/Twitter in my MASTER READING LIST.

We can’t say enough good things about his books as well as his wisdom. Here are some of our favorite quotes…

“The real key to making money in stocks is not to get scared out of them.”

It is so simple yet so challenging to execute. The evidence is overwhelming that owning stocks (especially good companies that grow a lot) through market volatility is the best strategy.

As we often discuss – our human psychology and emotions make us poor traders and investors. Master your fear, and you will master your investment returns.

“You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets.”

The impact of economic growth on earnings growth and the impact of earnings growth on stock prices is the most potent linear relationship in the stock market. It is also one that is surprisingly unacknowledged. 

Having a process to make lots of money is important, but having a process to survive down markets is a necessity.

“I've found that when the market's going down and you buy funds wisely, at some point in the future you will be happy.”

This is another excellent point about the impact of human emotion on your investments. It feels terrible to lose money even if you trust your process. 

However, if that process is well-defined and time-tested, it is an opportunity from which you will benefit in the future.

A stock market sell-off – and even BEAR markets – are opportunities.

“Don't bottom fish.”

This term – "bottom fish" – on Wall Street means buying the most beaten-down stocks.

It is one of the core tenets of the cult of value investing. It is also a great way to lose a lot of money. 

Lynch understood the power of growth. 

Why buy a stock that has been destroyed and is "cheap" when you could find one that is rapidly growing and cheap enough? There are thousands of stocks to choose from, and "selectivity" is key.

“Go for a business that any idiot can run - because sooner or later, any idiot probably is going to run it.” 

This is one of Lynch's funnier quotes, but it is a topic on which we have a controversial opinion. 

Many investors talk about only buying “great management.” Our view is – how do you know? 

If you have never run a trucking company, how would you know whether the management is good or bad? The stock price? Results?

We believe you should buy a business so good with such solid tailwinds that management almost doesn't matter. 

The best manager of a dying business is still doomed. Mediocre management of a fantastic business will still do great.