”You can’t see the future through a rearview mirror.”
When analyzing investments, past trends are good as long as they can show us developing trends, so high probability bets can be made about future direction of stocks and other securities. But, former shining stars may not come back to glory, thus past alone doesn’t indicate future performance.
”When insiders are buying, it’s a good sign.”
When corporate insiders are buying their own stock, usually it’s a good sign. They must believe in strong prospects of the company to invest their own money into it. Also, when a company repurchases its own shares, it’s a great sign as well. One of the ways to find about insider transactions is through Yahoo Finance site.
”If you’re thinking about investing in a troubled industry, buy companies with staying power. Also, wait for the industry to show signs of revival.”
Contrarian investing consists of betting against the crowd, including buying hammered-down stocks in troubled industries. But, these shares may stay low for long periods of time. Therefore, investors should look for signs of revival and changes in trends from declining to rising. Both fundamental and technical analyses can assist in this kind of investment research.
”With small companies, you’re better off to wait until they turn a profit before you invest.”
Shares of small company stocks can rise rapidly (and so they can fall). These companies are often ignored by big players. Since not every small company will make it big, seek to find small caps that have started to make profits. These can offer upside potential, although the risk is still high.
”Nobody can predict interest rates, the future direction of the economy, or the stock market.”
There’s an old saying that being an economist is an only job on Wall Street where one doesn’t get fired for being constantly wrong. No one can assure us about the future direction of the market, but watching developing trends and seeking good stocks selling below their intrinsic values makes the probability of success higher. You don’t have to be right all the time, but seek to make more out of your winners than you lose from bets on losers.
”There are always pleasant surprises to be found in the stock market.”
Stock market offers some undiscovered gems. But, you need to know how to find good research and understand it. Learning more about investment accounting, stock valuations, and understanding trends (in company performance and its share price) will help you to make better investment decisions.
”In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”
No investor is 100% right. Not even Peter Lynch. But good investors know when they made a bad investment and get out of it before it gets even worse. As the old saying goes, “Keep your winners and let your losers go.”
”Equity mutual funds are the perfect solution for people who want to own stocks without doing their own research.”
Not everyone is willing, or has time, to perform a thorough investment analysis. Investing in mutual funds is one of the options to get professional investment management for your money.
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Pay attention to what company insiders are doing
In this section, we continue to analyze what Peter Lynch, a former superstar mutual fund manager, has to say about investing. Much of his advice is timeless and all investors should take notice of what Lynch is saying.