What is the book all about?
Peter Lynch believes that the layman investor can also become an investment expert. He can use investment tactics and strategies like the professionals of big companies and earn money provided he does his homework thoroughly.
In the book, he says that if you as an investor think rationally and do your own research before buying a stock, ask relevant questions and keep your eyes and ears open while going to the mall, driving, working etc., you can also become a successful investor.
He says that it is not easy to time the market or predict how the economy will perform. Instead of trying to time the market or predict how the economy is going to perform, you should do your research and focus on what you know and what you can interpret.
The book gives a detailed account of how you should do your research and find out the business, the PE ratio compared to similar companies, Debt-Equity ratio compared to peers, profits, cash and management. He has classified companies into different categories and what investment tactics are to be used for each of the categories.
Some interesting ideas that he gives are -
1. You should look at boring, steady companies instead of the hot stock that everyone around is talking about
2. You should look at the products and services people are using around you and research on the companies making these products. He says you should invest in what you know. For example, if you have to search on the Internet, the first thing a majority if you do is type – www.google.com. This gives an idea about the company Google and its reach and then you can go ahead from there.
3. Do not invest in a stock just because the numbers are good. Look at the business, its value and its potential as well.
4. Do not invest in a stock just because the market is investing in it. You should have more sound reasons to buy a stock.
He also lists out qualities to be a successful investor -
- Have common sense
- Be willing to do your own research
- Ability to admit your mistakes
- Ability to ignore the brouhaha around about market trends, stocks etc.
The language is easy going and keeps you interested. There is not much technical jargon to intimidate the reader. It is a good book to read especially when you want to take your first steps in investing in stocks. It is also a book which can be referenced again and again for value investing.
You can find it easily in any of the online book stores.
Have you read this book? What are your thoughts on the book. Do let us know if you want us to review any book in the subject of personal finance.
* Please note that there is high risk involved in investing in stocks and we recommend that you invest in stocks through your Financial Planner and/or Mutual Funds.