Book: One Up on Wall Street (How to use what you already know to make money in the Market)
Author: Peter Lynch with John Rothchild
Here’s another one of my Wall Street favourites, and we haven’t even yet come to the Intelligent Investor. Now, Warren Buffet is definitely one of most well known people that made his fortune in the stock market, however, there are many others who have also done splendidly in the market. And that is who the book is about.
Now, I just want to bring to your attention that this was in fact the first book I read on investing in the stock market. My journey with the market only began around April 2018, when I signed up with an online investment portal. There, you have the full control to invest as much as you like through their portal on the stock exchange. In my case, this would be to the JSE. Not knowing a lot about the stock market myself, but being in the finance profession (not investing on behalf of other people’s funds, you can calm down, but rather something else where I do get exposed to how the finance of a company works) I felt it was time for a change. I signed up, deposited funds into the online portal’s bank, and got credited for the same amount of funds.
I signed up, but now the question was; wherein and how much?
A lot of us would maybe feel also a little uncertain at the beginning, which is normal, but that’s when i decided to read up a little about the different companies, and then make a decision based on that……. Some weeks pass, and I ask my friend (who is an investment enthusiast) for some advice, and he gave me a few book titles to have a look at. One of them was the one i’m supposed to be reviewing, but not being successful in that so far. 🙂
Anyway, I read the book, got more context (which I will elaborate more on below) and I feel somewhat more at ease and supportive of the investments i choose.
I’m sorry it took so long, but here we go.
What I immediately enjoyed from the start of the book is that he tells you to stop listening to professionals! Okay, so now, I’m facing a small dilemma. He is a professional, and he just told me not to listen to them, so should I stop reading? No, carry on with the book, he’s trying to teach you a different lesson. He wants to make it clear straight away that everyday people can be successful on the stock market. It doesn’t require special qualifications to be good at the stock market, because, quite frankly, the stock market can be quite unpredictable. It does follow the demands and reactions of us humans, but if you were asked to forecast how the price of a stock will look in a year, month, or week, you can only but speculate.
Even though you don’t need a specific qualification to succeed on the stock market, it does require you to think for yourself. That is the key to it. You do your homework (research the company and industry), observe where the country and world is now as at this point, and then make an estimated best guess whether this or that company has a prospect of growing its value, from which you want to benefit.
Peter gives us some of his tips on the strategy he uses to classify each company into a different class (ie. slow growers, stalwarts, fast growers, cyclicals, turn-arounds and asset plays), which is important for you for your specific portfolio you wish to grow. He also notes the importance behind the company’s story and nature of business ( 1)company name sounds dull or ridiculous, 2)the company does something dull, 3)the company does something ridiculous, 4)it’s a spin-off, 5) the big boys don’t own it, and don’t follow it, 6) the rumors around it, 7)there’s something depressing about it, 8)it’s a no-growth industry, 9)it’s got a nice niche, 10)people have to keep buying their products, 11)it’s a user of technology, 12)the insiders are buyers, 13)the company is buying back shares) which give all the same thing: context.
In this world it is crucial not to fall for the whispers that go through the market, but rather do some cold hard research yourself and determine for yourself what you see in this company. Simply because we are talking here about YOUR MONEY!!!!
Another tool he explains to the reader is the use of some of all the available ratios out there, specifically for the stock market. Now, for those that don’t know what a ratio is, the simplest I can think of is ‘the average mark for the math paper that was written a few weeks ago is …%, which is worse than the average mark from last year’s group; thus, the performance has dropped year-on-year’. To get to the avg %, we had to use the numerator and denominator of two data sets, and their relation gave us the average mark for that year. When we compared it to the prior year, we analysed the performance over two years…… In the same way we use ratios in the business environment to determine the company’s current financial position (its stability) as well as its performance (profits/earnings).
Now, all of this may be a mouthful when it comes to making a simple decision of TO BUY or NOT TO BUY. It may be a laborious task to do all that work just to determine whether to buy or not. Well, that is what your broker is supposed to do on your behalf. Getting as well-informed as possible, and then make the best choice from all the presented alternatives. Some of them deal with millions of our hard-earned currency, so you will definitely be more comfortable if someone does it properly, especially if it is your money (we’re all greedy when it comes to our money, so we want the best for it).
You can make a choice, either 1) you invest on your own, 2) only a broker invests for you, or 3) you and your broker invest both (which i hope is your choice as well). It’s safer if a broker also does some investing for you (specifically so you can retire with your mind at ease that you will be covered financially) because he’s in that profession for the long-haul, and wants to earn his commission, so he wants to make you money. But for yourself, as a hobby, take some funds and also try and do some investing yourself. Research and think about the market, and sharpen your gut.
I hope I’ve spiced you up (even if just a little) on how you will approach your next stock, because I definitely enjoy trying to read and guesstimate the market.
It has a somewhat conversational tone to it that it teaches you (as a mentor would) to make yourself aware that the stock market is not an unbreachable barrier, only attainable by select people. It teaches you the valuable lesson of patience and sticking to your guns and not following the crowd. it gives you some guidelines you can use and apply for yourself in building up a portfolio, and how important it is for you to take ownership. Definitely should be on any first-time investor’s to-read list, as well as anyone else that has been in it already for a while as a refresher. I give it my 4.9/5
Happy reading, (and maybe also investing) !