“Art enables us to find ourselves and lose ourselves at the same time.”
– Thomas Merton
A long, long time ago in galaxy near you was a man named Peter Lynch. He ran an equity fund turning it into an incredibly successful managed mutual fund. For the 13 years that Lynch ran the fund (1977–1990), he earned a reputation as a top performer, increasing assets under management from $18 million to $14 billion (as of 1990). He had some interesting wisdom to impart in a 2019 interview, part of which we’d like to share here.
What do you need to become a great investor?
Lynch: In the stock market, the most important organ is the stomach. It is not the brain. The amount of bad news you could hear is almost infinite now. So, the question is: Can you take that? Do you really have faith that 5 years, 10 years, 20 years from now common stocks are the place to be? If you believe in that, you should have some money in equity funds.
It's a question of what's your tolerance for pain. There will still be declines. It might be tomorrow. It might be a year from now. Who knows when it's going to happen? The question is: Are you ready—do you have the stomach for this?
Most people do really well because they just hang in there.
Is it time for investors to trim their exposure to stocks?
Lynch: Long term, the stock market can be the place to be. But I could toss a coin now. Is it going to be lower tomorrow, in 2 years from now? Higher? I don't know.
More people have lost money waiting for corrections and anticipating corrections than in the actual corrections. I mean, trying to predict market highs and lows is not productive.
Lynch: People are careful when they buy a house, when they buy a refrigerator, when they buy a car. They'll work hours to save a hundred dollars on a roundtrip air ticket. They'll put $5,000 or $10,000 on some zany idea they heard on the bus. That's gambling. That's not investing. That's not research. That's just total speculation.
Stocks aren't lottery tickets. Behind every stock is a company. If the company does well, over time the stocks do well, and vice versa. You have to look at the company—that's what you research.
Ask yourself: Can I analyze the company? Everybody has a good idea of what McDonald's does. But it's hard to analyze biotechnology companies or computer software companies. So, ask yourself: Do you know something about the company? What can you add to the math? Do you have an edge?
You could be an interventional cardiologist and you put in a heart pump. You say, wow, this really is an incredible breakthrough, preventing shock, providing hemodynamic support. You're actually in the operating room, seeing this breakthrough way ahead of most people. That's an edge. You need an edge on something.
If you don’t have that, hire someone who does.
Lynch: In baseball terms, you want to buy in the second or third inning and get out in the seventh or eighth.
Lynch: I think if you spent over 13 minutes a year on economics, you've wasted over 10 minutes. I mean, it's not helpful. Everybody wants to predict the future, and I've tried to call the 1-800 psychic hotlines. It hasn't helped. The only thing I would look at is what's happening right now.
Lynch: The question is: Do you understand what you own when you own a fund? Is this the flavor you want? Do you want real action or do you want something conservative?
There is certainly more to this interview, we just wanted to share some of what we thought were his most salient points. But the point is, we couldn’t agree more.
It’s your job to understand what you need, what you want and what your time horizon is and whether “you want real action” or want “something conservative.” And then to stick with it.
Our job then is to do the research to find the right mix of investments that have a good probability of accomplishing everything you need and want. And then it’s our job to monitor everything on a regular basis and keep you informed.
We’re in this together.
David, Lisa & Nicole
Past performance and does not guarantee future results. Any opinions are those of David Neunuebel and NEUNUEBEL BARRANTES WEALTH MANAGEMENT GROUP are not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected.