For years I’ve been looking for a good beginner-level book on investing. I wanted a book that felt approachable, that included frameworks for getting started and taught some of the stock market lingo that I’m not familiar with, a book that wasn’t complete bullshit but also wasn’t impossible for me to comprehend at my current level of understanding. For reference, I started with reading Benjamin Graham’s The Intelligent Investor in 2019. It did not go well.
But I recently finished reading Peter Lynch’s One Up On Wall Street: How to Use What You Already Know to Make Money in the Market, which was that perfect beginner-level book for me (and maybe prepares me for another crack at Graham). Originally published in 1989 the book is definitely dated, and Lynch writes from the perspective of a truly traditional investor, focused solely on maximizing returns without factoring in socially responsible investing principles. Despite that, I enjoyed reading it, and as I read I kept thinking about how many of the principles Lynch outlines for becoming a good investor could also be applied to becoming a good person.
Here are four pieces of his advice that stuck out to me most, for anyone new to investing or re-thinking their personal development:
Principle #1: Don’t follow the stock price, follow the company earnings
This is great advice for a new investor, but can also be applied to personal development if you squint at it hard enough.
In investing, the price of a stock is easy to find and it’s constantly changing, which is why so many people fall into the trap of day trading or panic-selling when they see fluctuations in price. The company’s earnings are a bit harder to find, but are the truest data point you can use to determine whether your investment is a good one or not. If the earnings continue to increase, you should be reassured about your investment, even if the stock price is going down (and if you do a bit more research to see how the company is doing, you can even use that moment as an opportunity to buy more shares while the company is undervalued, which will increase your return overtime. But I’m not here to give investment advice, do your own research).
If we think of ourselves as companies listed on the stock market, our stock price on a given day may or may not accurately reflect our earning based on any number of factors both in and out of our control. This can lead to some wild shifts in our sense of self-worth and meaning, if we follow it too closely. Instead of basing your value on where you “price” each day, focus instead on your earning potential for the future. Are you still aligned with what you believe in? Are the things you’re doing each day still bringing you joy, helping you find flow, or connecting you more deeply with others? Do you have a sense of purpose and importance? This must be tailored to what’s important to you, but if your earnings continue to increase, you know that you’re headed in the right direction.
Principle #2: Think like an amateur; don’t overestimate the perceived skill and wisdom of professionals
I hear a lot of people say that they don’t know enough about money or the markets to invest, and as Lynch hammers home in his book, you often know way more about making smart investment decisions than the analysts on Wall Street do, and you can invest without being weighed down by the same regulations and expectations that they have to deal with.
This is a great reminder outside of investing as well. Being curious, having a beginner mindset, asking questions, staying open minded and doing your own thinking will get you way farther than blindly following the advice of people who position themselves as knowing more about the subject than you do. While this may not apply to all instances (ahem, like in the case of “doing your own research” about a global pandemic), companies that list on the stock market have to provide a ton of information and transparency to consumers and investors, so the information you need is both easy to access and understand.
Principle #3: Don’t be contrarian just to be different
Smart investors don’t short the stocks everyone else is buying, they buy the stocks no one else has discovered yet. Being contrarian doesn’t mean avoiding or judging what’s popular. It means contradicting overly patterned and conditioned ways of thinking so that you can discover something new. Buy low sell high is an overly patterned and conditioned way of approaching stocks. Instead, if you have a compelling story as to why you’re making decisions, you can dictate your own portfolio and not be mastered by the market.
Bringing this back to a real life example, I grew up in the south where people get married and have babies when they are like, eighteen. So for most of my adult life I swore I would never have a wedding or kids. Granted, I’ve only been married a few months, but marriage is DOPE. I love telling people Bobby is my husband, and we are already great parents to his son, so I know one day we will be great parents to our own kids. I think I stuck with the ‘no kids no marriage’ mantra because it made me unique, and it gave me a reason for not being one of those 18-year-old brides, but that’s not a real reason to believe something is it?
My marriage is something completely unique to me and Bobby, even though millions of other people are also married. We didn’t accept and fall into the typical pattern of what it means to be husband and wife, we built (and are building) a life together that’s catered to us and our needs. I don’t need to undermine people who do it differently, I just need to trust that this is what works best for me.
Principle #4: You don’t lose anything buy not owning a successful stock
We are surrounded by the constant pressure to be it all, to do it all, to own it all. But you can have an incredibly successful investment portfolio that misses some of the most successful stocks. Right now I’d be a lot better off financially if I’d bought and held Apple stock when it first appeared on the market (which was in 1980, so 13 years before I was even born), but I’m not any poorer because I didn’t.
In life, it is ok to let some opportunities pass by, or to realize looking back that a different choice might have been a better one. That doesn’t mean you aren’t creating a successful life for yourself. It just means you aren’t done learning yet.