Many books on investing are trying to sell you some universal system with clear-cut rules that apply for everything and every time. Those bulletproof systems are enticing as they radiate an aura of certainty. Lynch’s book isn’t like that. Although he presents what he calls Peter’s Principles throughout the book, those are more of a “bon mots”. Some of them are more funny than practical, although they always contain at least a small piece of truth. Instead, Peter Lynch is teaching you by going over his career as a manager of famous Fidelity Magellan Fund and explaining how and why he made investment decisions that he did.
This hand-on approach is almost like being Lynch’s personal protege. Sure, you can not ask him any questions but it is close enough. While going over different economic cycles, various industries, and memorable moments of his career, you’ll learn a lot! Yes, there are chapters and the author made every effort to present a coherent and clearly structured work, but everything flows in an organic way right from the start when he motivates you by an anecdotal story of St. Agnes students who beat the market during school lessons. And if a bunch of kids can do it, surely can you, right?
But it pays to read between the lines (or just simply re-read some lines twice or three times). Like in this case – the Miracle of St. Agnes’ story might be (at first sight) simply a feel-good tale about how you can conquer the daunting world of investing in stocks without holding advanced degrees in economy or extraorbitant IQ. But look closer and pay attention to everything those school kids made right. They researched. And maybe even more importantly, they had to present their findings to peers and convince them. That held them accountable and weed out any stupid investment ideas originating from emotions instead from facts.
Same as this first chapter, the whole book is a light reading with a lot of personable tales and jokes. But make no mistake – the value is there. Peter Lynch never forgets to reiterate how important it is to read the financial reports and he mentions a couple things to look for, but he doesn’t dig into boring details. This is not a book on accounting. Beating the Street has just the right amount of everything to point you in the right direction, if you decide you need to educate yourself more on some of the related topics. This best-seller shares valuable insights on mortgage companies, S&Ls, retail sector, freshly privatized overseas companies and much more.
The one thing that I like the most about Beating the Street is that it does not pretend complexity where there is none. This annoying sin of many academic publications is simply nonexistent here. Peter Lynch does not try to convince you that he made a fortune for his clients only because he is some kind of genius or owns a crystal ball. He approaches investing and his own results with a great deal of humility. And I strongly believe that it is exactly that personality trait, that stands behind a lot of his success. He doesn’t have to prove anything to himself, others, or to the markets. Being an emotionally balanced individual goes a long way when investing in stocks.
Another thing that amazed me when reading about his career was the amount of legwork he always did before investing money. Lynch literally travelled to many companies headquarters and factories to see with his own eyes the operation side of the business. And when he couldn’t physically travel, he at least made phone calls, read the financial reports, and dug deep as he could. Does anybody doubt that this was also a major factor that set him apart from the herd of mutual fund managers?
Lynch talks also about the importance of psychology of investing when he mentions weekend worrying and constant “end of the world” forecasts that plague the community of investment analysts. It is a profound truth that analytically skilled people that are good at creating long-term prognosis, are more often than not very pessimistic individuals. On the other hand, the long-term reality of stock markets (especially in the US) is one of constant growth. Yes, there are often some crises but we always overcome them somehow.
In my opinion, every great philosophy of investing should be to certain extent applicable also as a philosophy of living. And Beating the Street delivers exactly that. When you finish the last page, you close the book with a feeling that you know a lot more about the stock market but also about what is important in life and how to approach challenges.
Without ever meeting the guy in person, I really like Peter Lynch after reading this book. Yes, he was the narrator so he had the power to present the facts to suit him or make himself look better. But I don’t think he needs that. After this published review of his work for Magellan Fund, I think he deserved every last penny he made in stocks. Final summary of this timeless classic might as well be:
- Hard work pays off
- Taking calculated risk is necessary
- Patience is the key
- Don’t be overly pessimistic
- Whatever you know about a specific industry can be a very valuable edge over the sea of investors who have only charts and financial statements but no internal knowledge of this niche.