There are numerous ways I can try to get rich investing. And one of the main methods I’ve chosen on my investing journey is to think like a billion-pound fund manager.
If I imagine the cash I have is other people’s money? It makes me less likely to take crazy risks.
Sure, some risk is necessary. I feel I can’t go through life never taking a leap of faith. But having strict risk management in place means I’m less likely to blow up my account. I don’t like the thought of having to start all over again at my age.
I’ve built up a nice amount of cash from investing over the past few years. I want to leverage those gains to keep growing my pot for retirement.
My investing role model
Peter Lynch is the model value investor. A voracious researcher, he created $14bn in wealth in his time as fund manager of Magellan at Fidelity. By taking his lessons from a lifetime of investing to get rich, I think I can maximise my gains. That will make the most of the modest amount of capital I have to invest.
I know I will only have a few hundred pounds, or maybe a thousand at most, to invest in the markets at any one time. I have a family and responsibilities to take care of. So I can’t go throwing fortunes into stocks and shares every month.
Thankfully, Peter Lynch has the knowledge I need to take full advantage of the money I do have.
Run my winners
Just because a stock has gone up a lot, doesn’t mean it can’t continue growing. Lynch says: “Your great mistakes are selling a good company, and it doubles and triples and quadruples. I sold Toys R Us way too early, it went up 20-fold after I sold it. I did the same with Home Depot. Those are probably the two greatest mistakes I ever made.”
Track my progress
Scientists are always testing and measuring their results. I have a better chance to get rich if I can think like a scientist. Physically keeping a journal or diary and writing down the reasons for buying a stock makes it more real, says Lynch. It helps to keep the mind focused on the long term. And it also helps tan investor avoid selling too early.
“You have to say to yourself: ‘In this stock, I have a 10-year story, a 20-year story’,” Lynch says. Having details written down in black and white? It makes my path easier to follow.
Focus on the earnings
Peter Lynch didn’t buy unprofitable companies to get rich. I could sit for years holding a company that’s making no money in the vain hope it will one day turn around. Why buy a business making zero pounds of profit? When there are so many out there already pulling in buckets of cash and returning excess profits as dividends?
Because I manage my family’s investing portfolio, I’m under the exact same pressure as a billion-pound fund manager like Peter Lynch. The scale may be different, but the philosophy is exactly the same. We all want to come out at the end with more money than we went in with! And that’s where the Peter Lynch philosophy really starts to shine.
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Tom Rodgers has no position in the shares mentioned. The Motley Fool UK owns shares of and has recommended Home Depot. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.