The Personal Finance Podcast - 20+ Investing Lessons from One Of The Greatest Investors of All Time!

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Starting point is 00:00:56 Find your advisor at IG Private Wealth.com. On this episode of the Personal Finance Podcast, we're going to talk about 20 plus investing lessons from one of the greatest investors of all time. What's up, everybody, and welcome to the Personal Finance Podcast. I'm your host, Andrew founder of Master Money.com. And today on the Personal Finance Podcast, we're going to be talking about 20 plus investing lessons from one of the greatest investors of all time. If you guys have any questions, make sure you hit us up on Instagram or, TikTok at Master Money Co and follow us on Spotify, Apple Podcasts, or whatever podcast player, you love listening to this podcast on.

Starting point is 00:01:55 And if you want to help out the show, leave a five-star rating and review on Apple Podcasts or Spotify. It truly does help out the show. And we are trying to get to that thousand review mark on Apple Podcasts as well. So it truly would help us out if you leave that five-star rating and review on Apple Podcasts as well. Now, today we are going to be talking about over 20 lessons that. we've learned from one of the greatest investors of all time. And who is that investor? We're going to be talking about Peter Lynch today.

Starting point is 00:02:23 And if you've never heard of Peter Lynch, Peter Lynch was actually an investor who wrote the book called One Up on Wall Street. And One Up on Wall Street is one of the best books that I've read. And I read it very early on. I think I read it back in 2013 or 2014. But once you go through that book, I think there's so many great investing quotes there as well. But Peter Lynch was the manager at a fund called the Magellan Fund.

Starting point is 00:02:44 And the Magellan Fund was one of the most profitable mutual funds. funds ever. And he would go in there and he would buy individual stocks and he made all the investing decisions. And he averaged a 29.2% annual return when he was at the Magellan Fund. But at heart, Peter Lynch was a value investor. And so what we're going to be talking about here is a lot of these investing lessons will portray to people who are interested in individual stocks, but they will also really, really set the tone for people who are interested in index funds and ETFs as well. Because it's really important to learn from people who have experience. and look at some of their experiences,

Starting point is 00:03:19 and you can also learn from their mistakes. They don't have to be your mistakes for you to learn from mistakes. They can be from other people's mistakes as well. So we're going to talk about some of his investing lessons today, and he has a wealth of knowledge when it comes to investing lessons. In fact, he's got some of my favorite things to ever read. So if you've never read one up on Wall Street, that is a fantastic book that we will link up down below

Starting point is 00:03:38 so you can check that out as well. And if you want to get a copy of these investing lessons so that you can review them if you want a PDF version, or you can use them to remind yourself, say, for example, if the market's down, He has some quotes on that. Then we'll give you a PDF version of this so that you're going to just have a downloadable PDF

Starting point is 00:03:54 so that you can remember it. So we'll link that up in the show notes down below as well so that you have that available for you for free. So these are some of the things we're going to be talking about here today. And without further ado, let's jump into these lessons. So like we talked about, Peter Lynch was a value investor. He bought individual stocks.

Starting point is 00:04:11 But at the same time, he was also proponent that a lot of people should be investing in index funds as well. So we're going to look through some of these quotes. I'm going to read off his quote, and I'm going to give you some of the key takeaways that I have from each of these quotes as well. The first one, everyone has the brain power to follow the stock market. If you made it through fifth grade math, you can do it. Now, what a lot of people think is when you're investing your money, a lot of people are intimidated by investing because I think it's a very complicated endeavor, especially very early on.

Starting point is 00:04:37 But truthfully, investing isn't that complicated once you kind of get the basics down. And so this podcast has talked about a lot of the basics before, but understanding some of those basics, things and really what matters more is your behavior around stocks. And this is the key thing to understand. People are intimidated by the numbers. The numbers are less indicative of your performance and what is more indicative of your performance is your behavior around stocks. And we're going to talk about a lot about behavior today because that's the most important thing that you need to understand when you invest your dollars. But most people think it's overcomplicated. It's not. And Peter Lynch is saying that here. If you can do fifth grade math, then you'll be able to really

Starting point is 00:05:17 understand the numbers when it comes to investing in stocks. So if you are someone who has overcomplicated stocks in the past, do not overcomplicate stocks. Do not think through this as something that is really, really scary to have to go out and do. Instead, understand that investing is a few basic principles. And if you get the few basic principles, right, you can do really well investing for the long term. And you've heard us talk about this if you're a student of index fund pro as well. The first five modules are just us talking about psychology for the most part. We're going through what happens if you invest your dollars over time? How can that money grow?

Starting point is 00:05:50 How fast can that money grow? And what are the principles that you need to be putting forth to be able to do that? That's exactly why we do that up front because we want your behavior to change first so that you know what the outcome is going to be if you invest your money. If you invest $1,000 per month, what's going to happen if you invest it with an X rate of return, for example? We show you that and show you if you get to the end here, this is exactly how much money you could have with that rate of return. So this is the cool thing about learning how to do this is you don't have to overcomplicate.

Starting point is 00:06:16 the math. The math is simple. There's a lot of calculators out there that they can help you with it as well. We have our own calculator we've developed that the index fund pro students are going to get this week. So you can see how this is going to work so that you can go through that process as well. So do not overcomplicate this. Do not become intimidated by investing. It's actually very simple math. Number two. And number two is about the rule of 72. We'll go through this in a second as well. But the rule of 72 is useful in determining how fast money will grow. Take the annual return from any investment, expressed as a percentage and then divide it into 72. The result is the number of years it will take to double your money.

Starting point is 00:06:53 The rule of 72, if you listen to the episode we had with Brian Ferraldi. Brian Ferralti invest in individual stocks as well. He has an amazing book called Why Does the Stock Market Go Up? And Brian Ferraldi talked about the rule of 72 in that episode as well. What the rule of 72 is is you can divide any rate of return. Say, for example, for example, you get a 10% rate of return on an S&P 500 index fund, for example. Well, you can divide that by 72, and you can see how long will it take me to double my money if I invest my money with a 10% rate of return. It's a really cool calculation, and it's a very cool way for you to be able to see, hey, how fast might my money grow over time?

Starting point is 00:07:28 So let's give you some examples here. Say, for example, that you invested with a 10% rate of return. Well, the rule of 72, you divide 10% into 72. It's going to take you 7.2 years to double your money. So every $1,000 that you invest, it would take you $7.2.2. years to turn that into $2,000. Every $10,000 you invest, it would take you 7.2 years to turn that into 20 and so on and so forth.

Starting point is 00:07:52 Say, for example, you got an 8% rate of return. Well, that would bump it up to nine years before you could double that money. Or if you got something like what we see in our savings accounts right now, by the way, savings accounts are really rising. Say you got like a 4% return on your high yield savings account, then it would take you 18 years before that money would double. So this is a really good calculation to kind of assess, hey, do I want to invest my money in some of these places, or should I pull back and find another investment that may be

Starting point is 00:08:18 more profitable for me and fits my risk tolerance? Those two things you've got to think through as you go through this process. So that's how the rule of 72 works. Number three, if you're prepared to invest in a company, then you ought to be able to explain why, in simple language that a fifth grader could understand and quickly enough so that the fifth grader won't get bored. I love how Peter Lynch brings some of this stuff out, because you need to simplify your investments. And we talk about that all the time on this podcast. Why? Because simplification means that you're going to continue to do something over a long period of time. And investing is a long game. You need to simplify your investing ideas. In fact, Warren Buffett is very famous for buying

Starting point is 00:08:58 billion dollar companies with a one-page contract. Why he simplifies down those companies to a one-page contract so that he can go out and buy them and streamline the process. Simplification is the name of the game in finance. If someone's trying to over-complicate a finance, situation. Say, for example, you're talking to an advisor and they're trying to overcomplicate a financial situation. They're using technical jargon that you don't even understand. You need to tell them to simplify this down because you can simplify money and really have some of the best returns out there. That's why we talk about index funds so much because index funds are the most simple way that you can invest and you can get some of the best returns where most professional money managers can't even beat out

Starting point is 00:09:37 index funds. That's why we love them so much because you can simplify down your investing principles. So if you're going to invest, say, for example, a company, you need to be able to simplify why you're buying that company on a simple napkin. And you need to be able to explain it to a child so that that child will also stay engaged. This is kind of how you have to think through investing. You need to know why and you need to understand the business completely and then be able to explain that in a very simple way. Number four, you get recessions. You have stock market declines. If you don't understand that's going to happen, then you're not ready and you will not do

Starting point is 00:10:12 well in the markets. This is a very important thing to understand because if you are a long-term investor and if you're investor in whatsoever, you need to understand that recessions are very normal. Recessions are going to happen. You are going to see your portfolio reduced by 20, 30, 40, sometimes even 50% if it's like 2007 and 2008 where your money might get cut in half. And a lot of people start to panic when that happens. But guess what you truly need to do? You need to understand that this is a normal part of the cycle within the market, and it's a very normal thing. It has happened so many different times that we've had bear markets, we've had recessions,

Starting point is 00:10:50 we've even had depressions. So understanding that this is a very normal thing, but long-term investors always win. Why? Because they're willing to ride out that wave. They're willing to ride out that volatility. This is a mindset thing. This is a psychology thing. Very early on in my investing career, when I saw my stocks dip, I got very nervous.

Starting point is 00:11:09 I remember my heart would start to flutter, all those different things. Now I could care less of my stock stip. Why? Because I'm a long-term investor. And if you take out a stock market chart, pull out your phone, take out the stock market chart and put it to the longest time horizon that you can. What direction does that market go long term? It goes up.

Starting point is 00:11:26 And that's what it's done historically over time. Now, sure, historical performance is not indicative of what's going to happen in the future, yada, yada, yada, we understand that. But at the same time, historically, since the very early 1900s, we have seen the stock market go in one direction. So you have to expect these downturns. You cannot panic during downturns or you will never be successful when you're investing. Instead, what you need to do is you just keep investing no matter what. Just keep buying consistently every single month. Take the portion of your money, whatever your savings rate is, 20%, 25, 30%, put it into the market or put it into whatever you're

Starting point is 00:12:02 investing in. Maybe it's real estate. Maybe it's something else. But put those dollars into income producing assets that produce an income for you so that you. So that you, you can retire because if you don't invest your money, you will not be able to retire. Number five, and this kind of goes along with number four as well as the real key to making money in stocks is to not get scared out of them. So people who buy stocks, then when the market declines, they sell, are not going to be successful with their long-term returns. You have to stay invested over the long run and not get scared out of investing. But the cool thing for people who do do this, if you're listening to this podcast and you're like, I've sold so many stocks when it goes down,

Starting point is 00:12:38 and then it goes back up again, and I'm driving myself crazy here. This is a skill that you can learn. Like I said, early on in my investing career, I would get worried when my stocks would go down. Now I could care less. Why? This is a skill that you can develop. There's a couple ways that you can actually develop this skill. Number one is education.

Starting point is 00:12:54 And educating yourself on the markets and how the markets move and reminding yourself that this is a very normal part of the cycle is one of the biggest thing. So you can do this through reading books. I read a lot of different investing books, especially early on. I would read tons and tons of investing books. that read 30, 40, 50 investing books every single year so that I can understand how market cycles moved. Study some of the best investors. Look at Peter Lynch. That's why we're doing this. Look at Peter Lynch. Look at Warren Buffett. Look at Charlie Munger. There's so many amazing investors out there that you

Starting point is 00:13:23 can see how did they react when the market dipped. Did they panic or did they buy more? How did they react when they did that? So you've got to think through how you are going to react and visualize what's going to happen because this is a very emotional thing for a lot of people. And once you take the emotions out of the equation, all of a sudden you can be a much better investor. Listen to podcasts. Listen to podcasts who talk about this kind of stuff, that market recessions are very normal. If you listen to any personal finance podcast or investing podcast that tells you to sell when markets go down, then you need to write that person off because this is something that over the long run, markets go in one direction historically. So you got to understand how this works.

Starting point is 00:14:01 So the more educated you become, the less fearful you become. That is the bottom line when it comes to this. Number six, there are substantial rewards for adopting a regular routine of investing and then following it, no matter what. And additional rewards for buying more shares when most investors are scared into selling them. There's two parts to this. Number one is most people are rewarded with a regular routine of investing. Now, if you heard the episode we had Nick Majulian, he talks about his book, Just Keep Buying, and that's one of the premises of the investing portion of that book on Just Keep Buying is Just Keep Buying. Just keep investing.

Starting point is 00:14:37 Why? Because historically, that is the proven way to build wealth over time. That is the first half. And the second half is if there are investments that you truly love and they take a dip in the market and you have cash on hand. Now, I'm not a person who keeps cash on hand just to buy dips. That's not something I do. I'd rather have the cash working for me right away.

Starting point is 00:14:55 But if you have extra cash on hand outside of your emergency fund, don't use your emergency fund for this. But outside of that, if you have extra cash on hand that you just don't know what to do with, and there's an additional stock that you know or in an index fund or an ETF or whatever it is that you truly believe in, you've done your homework, you understand it completely and you can understand it and explain it in a simple way, then that may be something where you would be interested in buying that at the dip because that's what rewards people as well. And that's what a lot of these investors do when you go through that process. Also, I'll give you an example of this.

Starting point is 00:15:26 I hold mostly index funds and ETFs. The majority of what I hold is index funds in ETS, but I do hold individual stocks as well. I have a dividend portfolio that I hold, but in addition, I hold some individual stocks in my taxable brokerage. And one of those stocks, my largest holding overall is Apple. Why do I hold Apple overall as my largest holding?

Starting point is 00:15:46 Because Apple is a way, in my opinion, where you can buy something that everybody is addicted to, which is their phone. And so you can actually buy into a company where people are addicted. In fact, in this room I have one, two, three, four, five, six, seven Apple products in this room alone. So when I go through this, I'm a person who buys a ton of

Starting point is 00:16:07 Apple products. I understand the company wholly completely. I've owned Apple since 2012. And so it's one where I've held this company for a very long time. It's been one of my best performing assets that I've ever had. So when Apple takes a dip, I understand this company wholly and completely. So when the market takes a dip, a lot of times I'll just buy more Apple along with index funds and ETFs. But I to buy more Apple during that time frame. Why? Because I think Apple's on sale. I think this company is on sale. They have so much cash that they produce. I understand the balance sheets. I understand how the financials work. And so when I see that take a dip every single time I go and buy more Apple. Now, that's not saying you should go buy Apple. What I'm saying here is this is this is a company

Starting point is 00:16:45 I believe in that I fully understand and I understand the surrounding financial metrics that you need to know in order to invest in a company like this. And the same thing can go for you on those dips as well. what Peter Lynch is talking about here when he looks at some of this stuff. Number seven, and this is a good one. The list of qualities an individual investors should have includes patience, self-reliance, common sense, tolerance for pain, open-mindedness, detachment, persistence, humility, flexibility, willingness to do independent research, and equal willingness to admit mistakes, and the ability to ignore the public. This is a lot of characteristics that an individual investor should have. And this is why I like to invest in index funds primarily,

Starting point is 00:17:28 because those are a lot of characteristics that you need to master before you can actually buy individual stocks for a number of different reasons. And so when I'm looking at this, this is why I just think most people should invest in index funds. In fact, we had Brian Feraldi on this podcast, what we talked about earlier. He wrote the book, Why does the stock market go up? And Brian Feraldi talks about this as well. He's an individual stock investor and says that 99% of people should be investing in an index funds. Why? There's so many characteristics that you have to have and you really have to master the psychology part. You have to master your psychology and master your behavior in order to be a good individual

Starting point is 00:18:02 stock investor. Number eight, if you go to Minnesota in January, you should know that it's going to be cold. You don't panic when a thermometer falls to zero. Now, this is a great example of you need to expect what you should expect. And when you invest in the market, you need to expect that the market is going to go down. You don't get surprised when the market has a decline of 20 or 30 percent. Instead, you understand that this is a normal part of this cycle. And if you expect the expected, then panic does not set in.

Starting point is 00:18:33 That is how you master this, is when you expect the market to go down, you're expecting this, then the panic's not going to set in. And that's why now I used to panic way back in the day. And now I could care less, like I said, because the panic does not set in. I expect the expected. So this is another key lesson that we have to learn right here. I remember when I needed to hire someone fast, but finding the right person quickly felt impossible. And if you've ever been there, you know how stressful this can be. That's where Indeed comes in.

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Starting point is 00:19:45 Terms and conditions apply. Hiring, Indeed is all you need. So lately, I've been noticing how fast things are changing at home. The kids are growing like crazy, clothes don't fit anymore, and routines are changing. And it just hits you. Life is expanding. And when your life grows, your responsibility grows with it. That's something I've been thinking about more this spring, making sure the safety net we have in place actually matches the life that we're building. And that's where PolicyGenius comes in.

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Starting point is 00:22:12 basics as well. This is why we created Index Fund Pro, because I believe that you can build the skill of investing, and I believe anybody can build that skill. That is why we started with that course first as our first offering. The reason for that is so that people can really truly learn how to build wealth. But this is a skill that you can learn. There is no natural born investor. Nobody is born with this. Some people may be more intelligent than others, like Warren Buffett, for example, is rumored to have a photographic memory. So that is a different thing entirely. But all of us can get the average rate of returns, which is a very profitable endeavor just to get the average rate of returns. Average is absolutely.

Starting point is 00:22:46 amazing when it comes to building wealth, especially when it comes to your investing. So here's a life hack. You can learn from the experiences of other people. So that's why I always read biographies from, say, some of these investors like Warren Buffett. There's a great biography called the Warren Buffett way, where it walks through all of the investments that Warren Buffett did throughout his life. And it kind of breaks down why he did them. And it shows you in a very digestible way, where it shows like each investment is like a page or too long, where it breaks down exactly why he did that. There's a bunch of great books out there like that where you can learn why people invest, how they invest, and what they invest in. Maybe you don't want to invest in the market.

Starting point is 00:23:22 Maybe you want to invest in boring businesses. We had Cody Sanchez on this podcast and she talked about investing in boring businesses. I think that's one of the best ways to invest your money. Maybe you want to invest in real estate. But learning these different concepts so that you can understand the natural born investor is a myth. You have to learn this stuff. It's a skill that you can learn so that you can earn. And that is the key when it comes to this. Number two, 10. I don't know anyone who sits on their deathbed and says, gee, I wish I could spend more time in the office. So the reason why we talk about financial independence so much on this podcast and why we talk about financial freedom and the power that your money has is because money is there to bring

Starting point is 00:23:59 you value. And the value that it can bring you is they can give you back your time so that you don't have to spend more time in the office. It gives you freedom of your time and it also gives you freedom so that you can spend more time with your family, your friends, whatever else you want to do. Nobody gets to the end of their life and says, I wish I spent more time in the office. You've got to remember that every single time you're thinking, hey, maybe I just need to spend four or five, six more hours tonight. I won't see my kids, maybe for the rest of a week, but I can get some of this work done. You got to think through some of this before you get to that point. And this is why financial independence is so important because you don't have to make

Starting point is 00:24:31 that decision anymore. Number 11, and listen to this one closely. A price drop in a good stock is only a tragedy if you sell at that price and never buy more. To me, a price drop is an opportunity to load up on bargains from among the worst performers and your laggers to show promise. If you can't convince yourself, when I'm down 25%, I'm a buyer, and banish forever the fatal thought, when I'm down 25%, I'm a seller, you'll never make a decent profit in stocks. This is another example of what Warren Buffett's most famous quote is, be fearful when others are greedy and greedy when others are fearful. What does he mean by that? is that when the market goes down by 25%, you should not freak out, you should not panic.

Starting point is 00:25:14 Instead, you should become a buyer because you bought these things with conviction for a reason. And you've got to remember that conviction and you have that one-page sheet available if you're going to buy individual stocks. One thing I recommend if you're going to buy individual stocks is you have a one-page sheet that you create for each stock that you buy on why you bought it. And every year, as you're going through those individual stocks, you say, hey, do I still believe in this premise? Do I still believe in these reasons on why I bought the stock? at the end of the year. If you don't, then maybe that's a good reason to use that capital and put it towards another investment that you do believe in more. But having these one-page sheets is incredibly important so that you remember why you did what you did, and if that is

Starting point is 00:25:50 still a good reason to actually own this company. So that's another quick tip there that I utilize when I buy individual stocks. Now, another thing is people always ask me when the market takes a dip, I get a flood of DMs that ask me, should I sell? Should I sell? Should I sell? You're going to know my answer based on listening to this podcast this far all the way through so far. But you got to understand that when you buy something, if you buy something like the S&P 500, for example, is the 500 largest stocks in the stock market. It's the 500 best companies in the U.S. stock market. Unless you think the U.S. is going to crash, which we have way larger problems if that happens, then sure, you should stay invested for the majority of the time in the S&P 500. In fact, I would never

Starting point is 00:26:30 sell an S&P 500 in Next Fund personally because I believe in the U.S. going forward. Number 12, stocks are a safe bet, but only if you stay invested long enough to write out the corrections. This is a powerful message that a lot of people need to hear. Stocks are a safe bet, but only if you stayed invested long enough to write out those corrections. This is the same exercise. Pull out your phone. Look at the longest time horizon there is on a stock market chart, and you'll see why. Long-term investors always win.

Starting point is 00:26:59 If you're a short-term investor, you're a day trader. This is obviously not the podcast for you, but at the same time, day traders really are not as profitable. There's a number of reasons why. We can talk about taxes. There's a bunch of other reasons as well. But you want to be a long-term investor if you want to build generational wealth. If you want to build generational wealth, the best investors in the world buy and they don't sell. And they only sell if you need the money in retirement when you're drawing down that money in your portfolio. You have not lost money unless you sell. Now one quick tip is if there is a downturn and you really still start to panic, even though you understand other stuff, is you can look at your

Starting point is 00:27:32 portfolio less during downturns or during bear markets, which, is exactly what I do. I don't look at my portfolio very often at all, but you can look at your portfolio less during downturns, and that's going to help you think less about it as well, because you know over the long term, the market goes in one direction, which is up. Number 13, long shots almost always miss the mark. Shout out to NFTs. So if it sounds like it's too good to be true, it probably is. I have a major lesson in this. So one of my first investments that I ever bought when I was a teenager was a penny stock. And I would get this newsletter, and I thought this newsletter was amazing. It was just some scammy guy who would send out this penny stock

Starting point is 00:28:09 newsletter. And every day, he would send out the penny stocks that he loved to buy. And I would watch them and a couple of them would go up and I'm like, oh, this guy knows what he's talking about. And then eventually, I finally took my $600 that I had as a teenager and the newsletter came out the next day. I'm like, I'm going to buy whatever he sends in this newsletter because I didn't understand investing yet completely. And so he sent out the newsletter. I bought the stock that morning. by the end of the day, that stock went from whatever the penny stock was. I think it was like, you know, a dollar or whatever it was, went all the way down to zero. That company was non-existent by the end of the day. And this was a pump and dump newsletters, essentially what it was.

Starting point is 00:28:44 I learned that day that long shots always missed the mark. And I would never do something like that. Again, this is kind of what drew me to go towards index funds and learn more about how to invest your money, where eventually I went to mutual funds, bought some mutual funds, and then went to index funds. But this is the lesson that I had to learn. I had to lose basically, my entire net worth as a teenager all in one day. So this is something where you can learn from my mistake that I just told you right here when I was very young. You do not want to invest all of your dollars into long shots. And really, if you're going to invest in long shots, this is why we talk about your crypto portfolio should be 5% or less of your portfolio. Why?

Starting point is 00:29:19 Because these are long shots. These don't have intrinsic values. They have no financials backing them. They're only worth what someone else says they're worth. So understanding that early on is going to be very, very helpful for you. Number 14. You just don't know when you can find the bottom. This is something where when I used to day trade, and I did use to day trade, by the way, when I used to day trade when I was young, I was in my very, very early 20s. I never knew when to get out. And you just don't know when the bottom is going to happen.

Starting point is 00:29:46 I never knew when to get out. No day trader can really tell you when to get out. They can have all these technical indicators and they can have all these things that come into play. But they never come into play at the time they think they're going to come into play. So understanding early on that you'll never be able to buy a stock at the bottom, if you're an individual investor. But if you can find a stock at a good price and you think it's a good price, then it probably is a good investment for you if you've done your research.

Starting point is 00:30:08 Number 15, this is for individual investors. The person that turns over the most rocks wins the game. And that's always been my philosophy. So Peter Lynch is saying here, the person who looks through the most companies and reads the most reports and understands the most companies usually wins the game. This is why Warren Buffett and Charlie Munger read about 500 pages per day. And he talks about some of the reasons why,

Starting point is 00:30:29 because it helps him find investments. He's turning over an insane amount of rocks. Peter Lynch did the same thing. Peter Lynch would walk through them all and look at companies and see which companies are busy. And if those companies were busy, then he would go home and research the stock. And he would do all these different things to kind of think through, how can I find trends and how can I find investments? But this is for individual investors.

Starting point is 00:30:49 Number 16. There seems to be an unwritten rule on Wall Street. If you don't understand it, then put your life savings into it. Show me an enterprise around the corner, which can at least be observed, and seek out the one that manufactures an incomprehensible product. What he's saying here is you need to understand what you're investing in. If you don't understand what you're investing in and you put a ton of money into something that you don't understand completely what you're investing in, then you are making a huge

Starting point is 00:31:14 mistake. Look down the street. All the companies that have been around forever within your community are all companies that you understand. They're companies that a lot of people understand. They know what it does. Maybe it's the local restaurant or the bakery, you know, the lumberyard or whatever those things are in your local industry.

Starting point is 00:31:30 Well, think of it the same way as a stock market. You can have fun in everything in life, but to me, when it comes to my investments, I'm not looking to have fun. I'm looking for the best chance to get the highest rate of return that's going to be steady throughout my lifetime. I don't want the extra risk. I don't want the extra added things that can throw me off in my plan. I want to get from point A to point B the fastest and safest way.

Starting point is 00:31:53 I don't want the excitement. I don't need the excitement. I don't need the thrills. That's why I invest in index funds. But the same goes for investing in your portfolio. Number 17. I love this one. The extravagance of any corporate office is directly proportional to management's reluctance to reward shareholders. So when you invest in a mutual fund that has really high fees and they have this really extravagant offices down on Wall Street, who do you think is paying for those offices and those fancy suits and all of those fancy harder for graduates? Your investment fee is. This is why we want to keep fees as low as possible because it doesn't go to income producing activities for you instead it goes to the fund manager and their office and funding their lifestyle. Keep fees as low as possible, but I love that quote. 18, 19, and 20 are all related.

Starting point is 00:32:35 So we're going to combine these three together. 18. You shouldn't just pick a stock. You should do your homework. 19. You should not buy a stock because it's cheap, but because you know a lot about it. Number 20. The worst thing you can do is invest in companies you know nothing about.

Starting point is 00:32:49 Unfortunately, buying stocks on ignorance is still a popular American pastime. All three of these are all about understanding the investments that you're looking at. And if you're going to buy individual stocks, you need to understand that company. How do you do this? You can look at 10Ks. You've got to understand how to read financial reports. There's a bunch of great programs out there to understand how to read financial reports. But you've got to be able to put the work in. It's a lot more work than a lot of people are willing to do, especially if you're looking to invest in something like value stocks, for example. Or if you're looking to be a dividend investor, you've got to have a whole complete plan on exactly why you're doing

Starting point is 00:33:22 this, then explain it simply. So all of these are talking about you need to fully understand the companies that you're investing in. For the longest time, Warren Buffett would not invest. invest in tech companies. Why? Because he did not understand how some of these tech companies operates. Now he invests a large portion in companies like Apple, but early on he did not understand tech companies. And during the tech boom, he thought there was a lot of risky companies within that tech boom. So instead, he invested in companies like Coca-Cola, Procter & Gamble, railroads, all the classic companies that he understood and can fully understand how they work. Number 21, never buy anything that you can't illustrate on the back of a napkin.

Starting point is 00:33:58 This is another great one I'm fully understanding, but keeping it. simple. And then number 22, and this is a great lesson for a lot of us to learn, you only need a few good stocks in your lifetime. I mean, how many times do you need a stock to go up tenfold to make a lot of money? Not a lot. And what this is saying is that if you simplify your portfolio, you keep your investment simple and you buy things that you completely and fully understand, and you're going to be a much better off than someone who buys 100 different stocks and has no idea what they're buying. Or if you buy index funds, you don't have to buy 20 index funds. In fact, we talk about this in index fund pro you buy one to five index funds to build out your portfolio you don't need to

Starting point is 00:34:33 overcomplicate this and so keeping your portfolio simple is one of the best things that you can do in order to simplify your entire investing lives listen so these are the 22 lessons from peter lynch i think these are absolutely amazing for you to kind of look through if you want this pdf we will link it up down below so you can download and look through all these and use these as reminders these are something where they are fantastic to remind you especially if you get stressed out when the market takes a dip there's a bunch of things here they're going to have to help you walk through that so you can think through every time you start to invest your money, you want to see some of these. And in fact, if you are not motivated to invest,

Starting point is 00:35:07 automating your investments is one of the best things that you could do, but also using this as motivation and reading through some of these quotes is also a great way to stay motivated as you invest your dollars. If you guys have any questions, make sure you hit us up on Instagram or TikTok at Master Money Co and follow us on Spotify, Apple Podcast, or whatever podcast player you're listening on right now. And don't forget, the Master Money YouTube channel has a bunch of new videos coming out. We just had one about the best Fidelity Index funds. We have one about the best Vanguard index funds coming out as well. So make sure you check out the Master Money YouTube channel. We have a bunch of great videos coming out in the Three Fund portfolio, the Three Fund portfolio versus

Starting point is 00:35:43 the S&P 500 portfolio. We're doing some deep dive breakdowns on there. So Master Money YouTube channel is a great place for additional resources as well. Thank you guys so much for listening to this podcast. Make sure you share it with a family or friend if you got any value whatsoever. And we will see you on the next episode. Medium power. 15 minutes. Sounds like Ojo time. Let's play.

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The Personal Finance Podcast - 20+ Investing Lessons from One Of The Greatest Investors of All Time!

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