Quannum

5

5 investment tips from the man who beat Warren Buffett

Number 5 foil balloon and gold confetti on black.

Warren Buffett is known for his long-term investment performance. Since the 1960s he’s achieved a compounded annual return of around 20%.

But in the 1970s and 1980s, Fidelity Magellan fund manager Peter Lynch beat Buffett’s performance. Over a 13-year period, Lynch delivered a compounded annual return of just over 29%.

And to put that in perspective, a £2,000 investment in the Magellan fund in 1977 when Lynch took control would have grown to around £56,000 13 years later. So that investment performance is well worth having.

Lynch wrote a few books discussing his strategy and tactics. And I’ve taken the following tips from Beating the Street. I think they really hit the nail on the head for the stock market conditions we have today. Here’s what he said:

The wisdom of Lynch

1) “In the long run, a portfolio of well-chosen shares and/or funds can outperform most assets classes. However, a portfolio of badly chosen share investments underperforms cash under the mattress.”

Over the long haul, the stock market’s performance has beaten all other major classes of asset, such as property, bonds and cash savings. But Lynch cautions us to choose shares carefully and after thorough research. 

2) “There’s always an over-looked company on the stock market, where share prices are undervaluing its prospects. All you have to do is discover it.”

Lynch didn’t achieve investment outperformance without working hard to find quality businesses with decent prospects for growth and a fair valuation.

3) “Ignore economic predictions and follow what’s happening in the companies you own.”

I reckon this advice is perfect for the conditions we have today. The general economic and geopolitical news has been grim. Share prices have been smashed to the ground. But despite all of that, companies keep posting good trading results and upbeat outlook statements. I think such a combination of factors spells opportunity for me.

I’m following Lynch by focusing on the news flowing from my investee companies. And I’m not wasting too much time listening to the general news. Shares look ahead, but the general news reports events that have already happened.

A great resource

5) “Stock market declines are common: they are great opportunities to buy bargain shares.”

We’ve just seen a brutal bear market for many stocks and shares. So I reckon this advice from Lynch is useful now. I’d aim to buy quality businesses with decent growth prospects. And I’d then hold for the long term as the underlying business progresses.

Lynch took his own advice and used it to deliver outstanding gains. However, all shares can go down as well as up. And companies can suffer unexpected operational challenges at any time. Furthermore, there’s no guarantee of investment success for me even if I follow Lynch’s tips.

However, that won’t stop me aiming to take advantage of today’s attractive stock market conditions. And I think Lynch’s books are a great resource to help me in my quest to build wealth from stocks and shares.

The post 5 investment tips from the man who beat Warren Buffett appeared first on The Motley Fool UK.

5 stocks for trying to build wealth after 50

Markets around the world are reeling from the current situation in Ukraine… and with so many great companies trading at what look to be “discount-bin” prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

More reading

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Leave a Reply