I am learning to invest in stock market, and I have just finished reading this book:
One Up on Wall Street, by Peter Lynch
Lynch is a former fund manager. He shares many similarities with Warren Buffet – both of them are long term investors who ignore short-term market fluctuation; both of them invest in companies, not in the market.
However, Lynch differs from Buffet in some other ways. Buffet likes to invest in companies with durable competitive advantages. Such companies would have very good track record; they would have been profitable for many years. The problem is: stocks of such companies won’t come cheap.
Lynch, on the other hand, groups companies into 6 categories – slow growers, stalwarts, fast growers, cyclicals, turnarounds, and asset plays. He has devised a strategy for each of these categories.
Lynch likens a potential fast grower to Harrison Ford. The Hollywood superstar was a carpenter before he joined the cast of Star Wars. A stalwart, on the other hand, is like a lawyer. A lawyer’s wagers, while high, don’t come close to Ford’s income.
In his book, Lynch guides on how to pick a winner, when to buy, when to sell etc…
After reading my post up to here, some of you are probably getting excited, and want to get a copy of this book. Those who have read this book may want to resign from your job and become a full-time investor. But let’s be realistic, can you become a millionaire by investing in stocks?
Let’s say your initial capital is RM10,000, and you invest in just one security. (Few people put all their eggs in one basket!) Within five years, the price of this stock rises by 10-fold. Your investment now values at RM100,000 – not bad at all! Even so, you’re still just a 0.1 millionaire.
I have invested in a few stocks, but I still can’t retire, yet…