The Peter Lynch Investing Strategy

One of my favorite quotes ever about markets, is as follows:

“It bothers me that people are not careful with their money. The public, when they buy a refrigerator, they go to Consumer Reports. They buy a microwave oven, they do that kind of research. They ask people what’s the best car to buy. They do research on apartments. When they go on a trip to Wyoming, they get a Mobil travel guide. When they go to Europe, they get the Michelin travel guide. BUT, people hear a tip on a bus on some stock and they’ll put half their life savings in it before sunset, and they wonder why they lose money in the stock market.”

This quote comes from the famous Peter Lynch and I’ve shared the video below, with my commentary. And, whether you’re new an investor, a pro investor or somewhere in-between, it is with absolute certainty that you’ve probably made this mistake before. You heard a tip, read an article, saw a tweet, and you went out and bought it. No research, no hard work, you just felt the urge to get in quick, get rich quick. 99% of the time, these trades go the opposite direction.

Peter Lynch continues:

“Then, when they lose money, they blame it on the institutions and program trading. That is garbage. They didn’t do any research. They bought a piece of junk, they didn’t look at the balance sheet, and that’s what you get for it. That’s what we’re being driven to, and it’s self-fulfilling. The public invests terribly, and they say they don’t have a chance. It’s because that’s the way they’re acting.”

I make it a hobby to think about this speech and quote as much as I can. The impulsiveness to buy a random stock because or investment because you heard something positive about it, is all around us, all the time, on social media, commercials, emails, phone notifications, it never ends. It’s the song and dance of modern markets.

Just remember to ask yourself these three things:

1. Are you actually familiar with this company or product?
2. Have you used it before?
3. Is it something you can explain to someone else in under 60 seconds?

Watch the speech below:

Written by Stefan Cheplick, a fintech builder and writer with experience at Stocktwits and TradingView. Background and published work.