<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Peter Lynch is one of the most successful investors in still achieved a remarkable annualized return of 29.2% over a period of 13 years, from 1977 to 1990, at the controls of Fidelity Magellan Fund. "data-reactid =" 11 "> Peter Lynch is one of the most successful investors of all time, with a remarkable annualized return of 29.2% over a 13-year period from 1977 to 1990, Fidelity orders. Magellan Fund.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Not only did Lynch build an excellent history of unmatched performance on the market, but he used many techniques that everyone can learn and he wanted to share his wisdom with ordinary investors like you and me through timeless classics such as One Up on Wall Street, Beat the street, and Learn to win. Whether you are a new investor or an experienced investor, I strongly suggest that you obtain copies of all three. "Data-reactid =" 12 "> Not only has Lynch built an excellent record of outstanding performance, but he has used it on many occasions – techniques that he can learn, and he to share his wisdom with ordinary investors like you and me through timeless classics such as One Up on Wall Street, Beat the street, and Learn to win. Whether you are a new investor or an experienced investor, I strongly suggest that you obtain copies of all three.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "With that, here are three of the best Peter Lynch investments and the lessons I have applied (successfully) to my own strategy, these are just a few examples. hundreds You can learn valuable lessons from Lynch's books, but these are the three that stand out most in my mind. "data-reactid =" 13 "> Here are three of the best investment lessons I've learned from Peter Lynch and how I applied them (successfully) to my own strategy. some of the hundreds You can learn valuable lessons from Lynch's books, but these are the three that hold me most in mind.

Birthday cake with lit candles and balloons in the background.

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On January 19, 2019, the legendary investor Peter Lynch turns 75. Source of the image: Getty Images.

Lesson 1: Use what you know to stand out

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The general theme of Lynch's most famous book, & nbsp;One Up on Wall Streetis that ordinary investors actually have certain advantages over professionals. One of them is the power of observation. In other words, consumers can detect trends that do not appear completely in quarterly reports or in analysts' calculations. "Data-reactid =" 27 "> The general theme of Lynch's most famous book, One Up on Wall Streetis that ordinary investors actually have certain advantages over professionals. One of them is the power of observation. In other words, consumers can detect trends that do not appear completely in quarterly reports or in analysts' calculations.

Applying this principle in my own investment strategy has produced my biggest return on investment (so far). Here is the condensed version of the story:

My wife and I go to a local craft market every Saturday with our kids. We take our dog with us and shop for unique things to put in our house and have lunch in one of the many excellent food trucks that frequent the market.

Usually, on the way to the market, I went to the ATM and withdrew money to cover our lunches and various purchases. However, in early 2016, I started to notice a trend. Every time I went to the market, I had to use less money. More and more sellers had tiny white card readers attached to their smartphones, allowing me to pay with a credit card for traditionally cash-only types of items.

<p class = "canvas-atom-text-canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "At the time, Square (NYSE: SQ) had recently completed his IPO and his stock was not too hot. Most Wall Street insiders considered him a niche manufacturer of payment processing equipment that could never be adopted on a large scale. However, I could see with my own eyes that they were wrong. A few weeks after noticing the trend, I did some research on the company and bought shares priced at $ 11 each. "Data-reactid =" 31 "> At the time, Square (NYSE: SQ) had recently completed its IPO and its title was not too hot. Most Wall Street insiders considered him a niche manufacturer of payment processing equipment that could never be adopted on a large scale. However, I could see with my own eyes that they were wrong. A few weeks after finding this trend, I did some research on the company and bought shares at $ 11 each.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Fast forward a few years and Square has taken advantage of its popularity in a growing financial ecosystem.Even after poor performance at the end of 2018, Square is negotiating more than six times what I paid for it less than three years ago. "data-reactid =" 32 "> A few years later, Square leveraged its popularity to create a growing financial ecosystem, and even after a mediocre performance at the end of 2018, Square traded more than six times what I paid for it less than three years ago.

<h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Lesson 2: You can diversify and beat the market "data-reactid =" 33 "> lesson 2: you can diversify and beat the market

A common misconception among investors is that, if you have more than a dozen stock positions, it is extremely difficult to beat the market. After all, to generate truly impressive returns, do not you need to place a high percentage of your capital in a few investment vehicles?

You might be surprised to learn that Lynch has achieved annualized returns of nearly 30% without an ultra-concentrated portfolio. In fact, during its incredible 13-year history, the Magellan Fund had more than 1,000 individual stocks in its portfolio.

The story continues

According to Lynch, if an action had a good chance of obtaining excessive returns, it would belong to the portfolio. However, it only invests in what it sees as the best stocks at one point – diversification of the sector is not a major concern. In other words, if Lynch thought that a particular sector was generally too expensive, he had no problem with being underweight.

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "I have also used this principle successfully. From now on, I own more than 30 individual actions and more than 50% of my wallet is made up of REITs, banks or insurance companies. Not only do I understand them well, but I feel that they offer the best opportunities. Sectors that I do not understand or do not see as much potential are particularly absent or under-represented in my portfolio. Here are three examples I can think of from the start. "data-reactid =" 41 "> I have also used this principle successfully.Today, I own more than 30 individual shares and more than 50% of my portfolio consists of REITs, banks or Not only do I understand them, but I think they offer the best opportunities, especially my portfolio is absent or under-represented in areas I do not understand or do not see as much potential Public services and retail are three examples I can think of from the start.

Lesson 3: Do your homework

<p class = "canvas-atom web-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "While One Up on Wall Street is perhaps Lynch's best-known book, my favorite is Learn to win. In summary, this book provides an overview of the basic concepts of trade and investment, such as reading stock prices and corporate reporting. In my opinion, this reading should be mandatory for all first year university students in the United States. It's as good as that. "Data-reactid =" 43 "> One Up on Wall Street is perhaps Lynch's best-known book, my favorite is Learn to win. In summary, this book provides an overview of the basic concepts of trade and investment, such as reading stock prices and corporate reporting. In my opinion, this reading should be mandatory for all first year university students in the United States. It's that good.

As Lynch said, "Behind every action is a company – find out what it does." In other words, it's important to do your homework when you invest and know how to do your homework well.

This is especially important when it comes to evaluating stocks that are not well covered by Wall Street analysts. Lynch thought that it was much more common for small businesses to be misjudged than larger ones. By learning to evaluate small businesses, I can confirm that this is true. In fact, some of my best investment gains come from small cap stocks.

Happy birthday to one of my favorite investors

With that, I would like to thank Peter Lynch for his contributions to my investment knowledge and wish him many happy returns. And if you're reading this and you do not know Lynch or his lessons well, do yourself a favor and get one or more of his timeless investment classics. You will be glad to have done so.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 48 "> More from The Motley Fool

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Matthew Frankel, CFP owns Square shares. The Motley Fool owns shares and recommends Square. The Motley Fool offers the following options: short January 2019, calls to $ 80 on Square. The Motley Fool has a disclosure policy."data-reactid =" 56 ">Matthew Frankel, CFP, owns Square shares. The Motley Fool owns shares and recommends Square. The Motley Fool offers the following options: short January 2019, calls to $ 80 on Square. Motley Fool has a disclosure policy.