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Saint Agnes Investment Maxims as Told to Peter Lynch

Updated on June 24, 2011

Saint Agnes Investment Maxims as Told to Peter Lynch

Many investors and aspiring investors have heard the name Peter Lynch. Mr. Lynch was, for thirteen years, the head of the Magellan Fund. This fund captured upwards of 20 billion dollars under Peter Lynch's stewardship. Subsequently, he has often been called the world's most successful mutual fund manager. He has since put fourth 3 very good, highly praised books: Beating the Street, Learn to Earn and one of the most highly lauded investment books ever, One Up on Wall Street.

Since retiring, Lynch has donated countless hours to different charity groups and schools. One of these was the St. Agnes School, where he worked with a seventh grade class. The class' teacher taught the class the value of investing and the class broke into groups which then picked the stocks they thought to be the best. Amazingly, the class' paper trading, had it been real trading, would have been more successful than that of many professional stock analysts. After working together, the class told Peter Lynch what they had learned. It should be noted that there is a bit of repetition in the maxims, though this may be by design, as the superfluous messages tend to be caveats. As well, they are here paraphrased by me, along with a tiny bit of extra information that I've added, based on my own experience in stock purchases, though on the whole are that of the class.

The following are the maxims for good investing set forth by Ms. Morrissey's seventh grade class stock investment, as listed on page 32 of Peter Lynch's book Beating the Street:

Any company that offers a dividend should raise its dividend each year. Otherwise this could indicate that the company may be falling on hard times.

It takes a long time to make money, but only a short time to lose it -so, be careful.

Stock investment is not gambling, provided you choose the right companies. This comes only from a proper amount of research put in before purchasing a stock. Also, never buy a stock based solely on its per share low price.

Besides making a lot of money, you can also lose a lot of money.

Don't invest in any company unless you've researched it well. This is like a form of insurance; it isn't foolproof, but it will help you to sleep at night.

Diversify, Diversify, Diversify! This will protect you if one sector goes down, as you'll have invested in companies in other, healthier sectors.

Bulk up your portfolio with numerous companies. Generally speaking, 60% of your stocks will be just so-so, 20% will be great winners, and 20% will be absolute stinkers.

Remember that stocks are a business, not players in a romance novel: never fall in love with your stocks. Be willing to sell them when necessary.

Don't randomly or haphazardly choose a stock -research it, woo it, take it out to dinner; if you still like it after all of this research, then buy it.

Utilities are great stocks as they tend to play a fine dividend. However, growth stocks will make you more money.

Stocks go up and down. However, when they go down, remember that they can still go yet further, so watch them, and be prepared to sell them off if they go too far down.

If you really are desirous of making money, small companies can make you the most money over time. Of course, be very choosy with what you select.

Never buy a stock simply because it is inexpensive; buy a stock whose company you understand well.


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