Peter Lynch’s Stock Picking Classic in 10 Points

An amateur investor can pick tomorrow’s big winners, investing legend Peter Lynch says in One Up On Wall Street (1989). But only if they take heed of the following:

​​There’s an unwritten rule on Wall Street: If you don’t understand it, then put your life savings into it.

Never invest in any company before you’ve done the homework on the company’s earnings prospects, financial condition, competitive position, and plans for expansion.

Invest in companies, not in the stock market. Ignore short-term fluctuations.

History tells us that corrections (declines of 10% or more) occur every couple of years, and bear markets (declines of 20% or more) occur every six years. If a stock is down but the fundamentals are positive, it’s best to hold on.

Even better, buy more.

Even blue-chips stocks, supposedly the safest of all propositions, can be risky.

Buy the right stocks at the wrong price, and you’ll suffer great losses.

Predicting the economy is futile.

Predicting the short term direction of the stock market is futile.

Be an investor, not a pundit or speculator.

Don’t overestimate the skill and wisdom of professionals. Take advantage of what you already know. 

Pay attention to new developments at the workplace, the mall, the auto showrooms, the restaurants. A keen eye on consumer trends will help you spot the best new stocks that take advantage of those trends.

The true contrarian doesn’t take the opposite side of a popular trade (i.e. shorting a stock that everyone else is buying).

The true contrarian buys the stocks that nobody cares about, and especially those that make Wall Street yawn.

Bottom line: Large profits - and losses - can be made in buying and selling stocks. Stock picking is not for everyone, nor even for all phases of a person’s life. But if you’re willing to learn, to keep your eyes open, and to be patient, you can beat the market.