Peter Lynch is one of the most successful investors of all time. He is known for his adaptative approach to the stock market, which has inspired many. A legendary former manager of Magellan Fund, Peter Lynch took over the fund in 1977, and for the next 13 years, he did what nobody had imagined.

Let’s take a look at Peter Lynch’s investment strategy and teachings.

• Peter Lynch is one of the most successful investors and a well-known philanthropist.
• He worked as a manager at Magellan Fund and brought the fund an impressive annual return of 29.2%.
• As a firm believer in retail investment, Peter Lynch is known for his unique and credible investment strategies, such as “buy what you know”, " the Rule of 20”, and long-term investments.
• He founded The Lynch Foundation in 1988 based on his principle of investing in what appeals to you.

Born in Newton, Massachusetts, Peter Lynch had a rather troubled childhood as his father passed away when he was just 10 years old. To support the family, he started working as a caddy, and it was the overheard conversations at the Golf club about the stock market that drew his attention.

He completed his degree in finance and has since created a legacy that investors admire. While Peter Lynch retired at the age of 46, his investment strategy kept him relevant in the stock market.

Peter Lynch strongly believed in the strength of retail investors as opposed to large investors and “buy what you know” instead of following a trend. Here are some of his investment strategies that can help in your investing journey:

1. A story investor

Peter Lynch was known as a story investor. He emphasised creating a story about a company’s financial performance, historical performance, and potential for growth. His story had characters based on the company’s goals and realities, based on which he bifurcated companies into slow or fast-growing companies, reasonable companies, etc.

This particular strategy was built around the idea of conducting research so comprehensively that one could create a story about the company.

2. Buy what you know

He firmly believed that all humans are capable of observing and analysing the environment to make everyday choices. The same approach can be applied to investing in the stock market. Based on what you hear, see, and common sense, making smart investment choices becomes simple. This is what he called the “buy what you know” strategy, and he strongly opposed the principle of following trends.

3. Stay for the long haul

Swing trading was not a cup of tea for Peter Lynch, as he always chose to stay committed to his investments until the company’s financial health became poor. He preached the power of compounding in the long run and staying with the investments without timing the market.

4. The Peter Lynch formula

Apart from providing investment philosophies and strategies, Peter Lynch has developed some key formulas to ease investment decisions:

• P/E ratio: The price-to-earnings ratio is a financial metric that allows investors to compare a stock’s current price to the company’s earnings per share. A higher P/E ratio indicates better returns.
• Growth rate: This is a simple formula for calculating the stock’s historical performance relative to its present status.
• Potential: Lastly, Peter Lynch talked about examining the company’s potential by conducting thorough research.

What you read is only a fraction of everything Peter Lynch has to offer, but these are key strategies that can help you make better investment choices. As an investor, he has made pathbreaking choices that changed the fate of the firms he worked at. For instance, when Peter Lynch joined the Magellan Fund, it resulted in the firm bagging 29.2% annual returns! There are several other achievements marked under his name as an investor.