Note: This article is a guest-post from Lee Leigh Ann. She is an intern at the investment fund that we (Ser Jing and Jeremy) are running. In this piece, Leigh Ann, who’s from Generation Z, shares her thoughts after completing one of our assignments, which is to read Peter Lynch’s classic investing text, One Up on Wall Street. Please enjoy!
Being someone who is completely new to investment, my first impression when I saw the book One up on Wall Street was that it is going to be one of those profound books that only professionals understand. After all, books with the author’s picture plastered on the cover page do not seem all that attractive… to me at least. I was proven wrong very soon though, when I found myself already halfway into the book.
The book itself, contrary to its appearance, was actually an easy read. It was not packed with bombastic words and flowery language. In fact, many ideas were illustrated simply using analogy that could be easily understood. One small problem for me though was that I could not relate to certain terms used or examples given as easily. This is due to certain company names quoted that were unfamiliar in the local context. But this was not a major issue for me.
Throughout the book, I was introduced to many new and refreshing perspectives. In school, though I was taught about investments, it was mainly theory-based and on a superficial level. This book provided me with new insights that are gained through 17 years of real life investing experiences by the author. There were many mind-blowing moments in the book.
From the book, I got to learn the difference between a speculator and an investor. To me, I just thought that anybody who invested in stocks is simply called an investor. Now, I realise that this is not the case. The difference between an investor and speculator is their difference in attitudes towards a stock. Investors want to generate long-term gains by holding onto a stock for more than a year while speculators go for quick capital appreciation. Investors conduct more in-depth research towards a stock and believe that the stock will eventually generate profits while speculators do not spend much time on their research and just jump at any opportunity to make quick money.
There is a main idea that is constantly enforced throughout the book: You do not always have to listen to professional fund managers or buy the hottest stock in the market. If one is able to observe surrounding businesses, one may find a company with high growth potential.
Of course, this does not mean that you start to invest in any growing business that you see in your neighbourhood. Successful investing requires one to conduct adequate research about the fundamentals of the business – such as understanding the management style, looking through past years’ balance sheets etc – before you decide to invest your money into the stock. It is advised by Lynch that an individual dedicate at least an hour a week to research about a certain stock that they are interested in.
Investing in a familiar industry is recommended too as compared to an unfamiliar one. Let’s say you work in the healthcare industry. It is advisable that you invest in the same industry as you would have a professional edge over somebody else who does not work in the healthcare industry. Meanwhile, there is also a consumer edge where users of the product have an edge over non-users. To have an edge means that one has the upperhand knowledge regarding an investment decision that the others do not. Having knowledge on an industry/company that you want to invest in allows you to make a more informed decision on whether a certain company’s stock is worth investing in.
Here, I would like to share some of my mind-blown moments:
- “The average person is exposed to interesting local companies and products years before the professionals”
- “Big companies have small moves, small companies have big moves”
- “Look for companies with niches”
- “When in doubt, tune in later”
- “Invest at least as much time and effort in choosing a new stock as you would in choosing a new refrigerator”
- “If a stock goes to zero, you lose just as much money whether you bought it at $50, $25, $5 or $2”
I would like to think that this book not only provided me with invaluable insights regarding investing in stocks, it also changed my perspective towards such “professional-looking” (for lack of a better word) books.
As the famous saying goes, “Do not judge a book by its cover.”
Like literally.
Disclaimer: The Good Investors is the personal investing blog of two simple guys who are passionate about educating Singaporeans about stock market investing. By using this Site, you specifically agree that none of the information provided constitutes financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life.