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Jan 31, 2021

Learn to earn by Peter Lynch

 

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Peter Lynch: Peter Lynch is an American investor, mutual fund manager, and philanthropist. As the manager of the Magellan Fund at Fidelity Investments between 1977 and 1990, Lynch averaged a 29.2% annual return, consistently more than double the S&P 500 stock market index and making it the best-performing mutual fund in the world

A very important concept of investing is not being taught in our education system, which is Investing. Our school system train us on to get a job and earn money from it, however we were never taught about investing in schools and colleges.

We can contribute well in the progress of the country by helping to advance the economy of our country.

Earning money is the basic need of everyone for survival, so to meet his basic needs. However not everyone know, that we can enhance our simple earnings into great investments by simply saving and investing.

Also not only we accumulate great wealth but also take participate in the economic growth of the country, through these investments and we can help in the economic growth of the nation and we can achieve this through investing in the stock market.

If you own a share of the company, you hold the ownership of the company and you become a part owner of the company.

The investor is entitled to a percentage of a profit and his liability is only limited to a share value. The benifit is that despite being the owner of the company, you do not bear the losses beyond your investment value and also you can quickly buy and sell the shares of any company at any time.

We can analyse any company by using simple maths and can invest in them by purchasing shares. Simply we use our small savings and invests them in mutual funds, stocks and shares, in different bonds and in Government security bonds for a better return.

We are not taught about the power of saving and investing that money from a young age and putting the money at work, that how money makes more money for us using the power of compounding.

Investing money in the right place can lead to our future financial growth.



The important factor is not how much you invest, but for how long you kept the money invested, that's where the Power of Compounding works.

Einstein famously said that compound interest is the most powerful force in the universe. He said, “Compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn't, pays it.



Warren Buffet, start investing from the age of 11 and by the age of 60 years, he gets his millions from those investments, he invested the money for 50 years and hence he has this massive wealth from investing in stock markets and mutual funds.

We do not really know the power of all the money, when we think that if we are going to buy some goods for 1000 rupees then we think that we will spend 1000 rupees. But the big investors who really understand the power of money, they see how anyone looks at the expenses 



As per Peter Lynch has to spend one thousand rupees then he will think first that if I do not invest this one thousand rupees and on this, I will get 24% profit per year instead of 29%, then in twenty years one of today's 1000 rupees will be about one and a quarter lakh rupees. They think that if I am spending a thousand rupees here today, then I am not losing a thousand. After twenty years I am making a loss of 1.25 lakh rupees. Whenever you think that you are spending money today, if you are in the stock market or

If you put it somewhere wise and let it remain for many years, then how much money you can save on it. Only then will you understand the real power of money and then whenever you make any small savings you will also invest it properly. No matter what your income is, the amount of money you can save,

Save and keep investing in the market. After a long time, after 15-20 years, it is certain that you will have a lot of money. It is said that the real power of money should worry about the future value, not today. Many people will also think that after 15-20 years, inflation will also increase, but if you look at the figures, inflation increases at the rate of about 6%. That is why if you buy stock well, in the next 15-20 years you beat the inflation.


Timing the Market:

That is to always think that if I have taken a share in 100 and will sell it at 200 then when it comes down to 150 then I will buy and sell at 200. They may also be successful in doing this a couple of times, but by doing so, it becomes the habit of the investor to buy a stock and earn 10% -20% in it, then sell it and then when he If the stock goes down then I will buy it again.

They think of earning from this cycle. But here Peter Lynch has told that no matter how big the world investor is, he has never been able to time the market. If the big people could not do this field, then our chances of being successful in it are very less. Which has less chance of success, why to do it? So stay away from it.

 For example, if you have a good share, which you got for 100 rupees, you kept that share for 150 but as soon as it turned 150, you sold it thinking that when it comes to 120 or 130, then I buy again. I will take it, but if the same share goes straight from 150 to a thousand, then you have lost the opportunity to earn 10 times, only in the greed that 20-30 rupees will go again, I will buy again.

From this cycle, they think of earning. But here, Peter Lynch has pointed out that no matter how big an investor in the world he has ever been able to time the market. The chances of us succeeding in what the region has not been able to do big people are too low. Why do they have less chance of success? So avoid it.

For Example if you have any good shares, Which you got for Rs. 100, kept your share up to 150, but as soon as it was 150, you sold it thinking that when it came to 120 or 130, I would buy again, but if the same share goes up from 150 to a straight thousand, you lost 10 times the chance to earn only 20-30 rupees in this greed. I'll buy again. If you have taken shares in a good company, its fundamentals are good, you trust it, then avoid time to market in an affair to earn Up 10, 20 rupees. If there are good shares, keep it falling or growing for a long time only if you are able to make good money.

If you have taken shares in a good company, its fundamentals are good, if you have faith in it, then you should avoid having to time the market in the matter of earning 10, 20 rupees. If there are good shares, then fall or rise, keep it for a long time only then you will be able to make good money.

When we buy a stock, we are actually become the owner of the business, So there is a difference between a speculator and investor.

A speculator is one, who does short buy and selling and try to time the market and an investor believe in investment for the long time. 

We do not really know the power of all the money, when we think that if we are going to buy some goods for 1000 rupees then we think that we will spend 1000 rupees. But the big investors who really understand the power of money, they see how anyone looks at the expenses.

If Peter Lynch has to spend one thousand rupees then he will think first that if I do not invest this one thousand rupees and on this, I will get 24% profit per year instead of 29%, then in twenty years, one of today's Thousand rupees will be about one and a quarter lakh rupees.

They think that if I am spending a thousand rupees here today, then I am not losing a thousand. After twenty years I am making a loss of 1.25 lakh rupees.

A common investor comes to this market with big dreams, there are a lot of expectations. He always thinks from this stock market that he should not buy the wrong shares from the always successful, the Mutual Fund in which he put the money in the share should always go up. And he always starts to consult from place to place in the way he is finding the right stock. But it is not always possible to do so, if you have come to the stock market, let's assume that you will lose.

 There are no one in this market that has never suffered. That is why you are not afraid of being failed, you know that all the big investors in the stock market have a very high rate of failure. It is not, that only 10% or 20% fail, they also fail very, they also sometimes buy very bad shares but what they do, they hold the good shares for a long time. If a share is Rs. 1000 it means that it has increased by 10 times, your 5 losses will compensate the share. Suppose you have put 100-100 rupees 10 and one of your shares increases by 10 times and 9 shares of the rest are zero, you are in No Profit, No Loss.

 

 What do you have to do, buy some wrong shares, buy if there is a loss, what mistake did you make and what did you think of buying the share that went wrong? What was your guess? You don't understand the management of that company or you don't understand that industry or you're relying more on that company's product.

 

Learn from your mistakes :

A common investor comes to this market with big dreams, there are a lot of expectations. He always thinks from this stock market that he should not buy the wrong shares from the always successful, the Mutual Fund in which he put the money in the share should always go up. And he always starts to consult from place to place in the way he is finding the right stock. But it is not always possible to do so, if you have come to the stock market, let's assume that you will lose.

There are no one in this market that has never suffered. That is why you are not afraid of being failed, you know that all the big investors in the stock market have a very high rate of failure. It is not, that only 10% or 20% fail, they also fail very, they also sometimes buy very bad shares but what they do, they hold the good shares for a long time. If a share is Rs. 1000 it means that it has increased by 10 times, your 5 losses will compensate the share. Suppose you have put 100-100 rupees 10 and one of your shares increases by 10 times and 9 shares of the rest are zero, you are in No Profit, No Loss.

What do you have to do, buy some wrong shares, buy if there is a loss, what mistake did you make and what did you think of buying the share that went wrong? What was your guess? You don't understand the management of that company or you don't understand that industry or you're relying more on that company's product.

 Was that the problem that caused the company to flop? And next time, improve that mistake and buy the shares with caution. In this way, when you reduce your mistakes, one day it will come when you are able to buy good shares continuously. Not much if you've got only 10 stocks that have been 100 times, you'll be able to make good money.

Stock Prices are not top priority:

Suppose you should be told that there are a 10,000 mobile phone, will not take it? You will immediately say how do I take it, tell me something about that mobile?

What are the mobile model, RAM, screens resolution, battery backup etc. When we want to know all about it before buying everything, why doesn't it happen to the stock?

Why when it comes to sharing, first of all, we ask, what is going on?  The price of that share does not mean anything unless we know what the quality of the company is?

 How weak or how strong are the company? Who are in his management? What is his balance sheet? Annual Returns? What are her Future Plans? Etc.

Only when we know all these are the value of that share price. Only then can we predict whether the shares are getting cheaper or costlier?  Without knowing all this, we all make a mistake that whenever a share name comes, we ask what is the price? First you should read about that company and then decide something. The price of any share says nothing in itself.

Start Early:

It is very important, as soon as you can start, especially young people think that we don't have much money now, I can save 500 or 1000 rupees a month. No matter how much you are able to save, it is necessary to start.

The less money you get started, the more mistakes are in the beginning and you learn from those mistakes. If you have less money, you will also feel less pain of making mistakes.    This is the best time to start investing in our country, which today our countries are zero Brokerage brokers who do not take any commission from us to invest from you. For e.g. Zerodha or Upstox, I use Upstox myself. If you want to open your Account in Upstox, click here.

If you want to invest in mutual funds, applications like Grow or Kuvera are available that let you buy Mutual Fund without any commission. That's why you start to invest as quickly as you can. Mr. Warren Buffet, the world's largest investor, has been investing since he was 10-11 years old, making money by selling newspapers and coke bottles and investing his savings in the stock market.  He always finds good companies, and holds it for several years.

And finally, I would like to say the most to you, you can invest your small savings (Saving) in buying stock market shares or in mutual funds. But just as you have to learn to drive first and practice it to drive. In the same way, you need to learn your money before you invest, so first of all, you should be the goal to learn about investing, then say your sweat earnings and get profits|

Why Stock Market?



The different kind of investment available today after you save some money aside are as below:

1.      Fixed Deposit in Banks and Financial Institution

2.      Mutual Funds

3.      Gold or Gold Deposit Scheme such as Sobranie gold bond.

4.      Government Bonds and Debentures Schemes

5.      PPF(Public Provident Fund ) Scheme

6.    Real State

7.      Stocks and Shares

 

Every Individual wants to make more money with the help of money he already has. The process of making money out of money is known as Investment. Investment is the commitment of funds in an asset or financial instruments with the aim of generating future returns in the form of interest, dividend or appreciation in the value of the instrument. Investment is involved in many areas of the economy, such as, business management and finance no matter from households, firms, or Governments.

 

Usually Investment is confused with the commitment of funds for gains only hence risk and duration of investment is ignored. Funds used for gambling, speculation also are committed for gains but these cannot be termed as an Investment. Investment is a process where an individual carefully analyse the various investment instruments available in the market defines his risk profile and then matching these two take the decision to put his money for a longer period to earn returns.

 

An investor has different investment options to choose from, depending on his risk profile and expectation of returns. Different investment options represent a different risk-reward trade off. Low risk investments are those that offer assured, but lower returns, while high risk investments provide the potential to earn greater returns.

 

Hence, an investor’s risk tolerance plays a key role in choosing the most suitable investment. Various investment options available are Bank Deposits, Commodities like Gold, Silver etc., Post Office Savings Schemes, Public Provident Fund, Company Fixed Deposits and Stock Market options like Bonds and Debentures, Mutual Funds, Equity Shares etc., Of the various types of investment options in the Stock Market, Gold Exchange Traded Funds (Gold ETFs) happens to be one of the best options to be included in the portfolio for diversification of risk.

 

IThe biggest mode of investment is the stock market in which most of the people are willing to invest. But due to lack of knowledge, some of them not get a proper start.

 

As like, before driving a car we have to train ourselves and also do practice to drive a car. Similarly in the stock market before investing we should know properly how to invest in the stock market.

 

Stock Market is the place where a businessman can collect money for their business. In 1602, the world’s first Stock exchange market was developed in Amsterdam. People can purchase a share of the company in the stock market and become its part-owner.

 

The growth of the company increases its share price. So when the company get success it provides profit to its company, their investors, give jobs to people and pay tax to the government. Investors become part of the success story of a company and earn profit by investing in them.

 Among all the other mode of investment, historically it has been found that Stock Market always give a huge return on investment over the long run and when the money is compounded.

If you buy the share/s when the prices are hight and sell them when prices are low as market always fluctuats, you will be at loss.

 However in the long run, you will always earn good returns if invested intelligenty on the good stocks.

The Key is you need to start the inestment by investing at the low rate of the share price and sell it when the company grows along the way, where the share price increses, you get devident income as an added benifit and a high return, which when invested it provide more yeilds on the amount invested and that is how you grow your wealth.

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