Peter Lynch said: "the trick to investing is not to learn to trust your inner feelings, but to restrain yourself from paying attention to your inner feelings." "

When the market closes with wild swings, when faced with dismal earnings, it is time to pinch and calculate.It is found that there are only more than 60 days left in 2021.Are you still able to restrain yourself from your inner feelings, as Peter Lynch said? Many people think that the Master's words have some "no cannibalism", but there is a practical methodology behind it.

Today, let's justOnly talking about methodology. The smart editor sorted out Peter Lynch.Practical investment advice for ordinary peopleLet's learn from the master and build a profitable and safe portfolio.

How much money is reasonable?

Trying to buy a falling stock is like trying to grab a falling knife. -- Peter Lynch

How much return do you expect from the stock market every year?

Don't have any unrealistic fantasies, Peter Lynch tells you responsibly:The average long-term return on investment of general stocks is 9-10%, which is also the average return on investment of stock indexes in history.

This rate of return can be easily obtained as long as you need to invest in the S & P 500 index fund, and it should also be a benchmark to measure your own investment level.

In addition, the rate of return mentioned by Peter Lynch here has deducted all kinds of costs, including transaction commissions and fees, subscriptions to investment newsletters and financial magazines, fees to attend investment seminars, telephone charges, and so on. All the expenses you have incurred from investing in stocks.

So,If you are not willing to simply invest in the index, nor do you intend to leave the money to professional investors to manage, but want to take care of it yourselfSo Peter Lynch says that in the long run, after deducting costs and commissions, plus dividends and other dividends,You need to be able to achieve at least a 12-15% annual return on compound interest.To prove that your time and effort is worth it.

How many baskets do you want to put your eggs in?

Investment without research, like playing poker and never looking at cards, is bound to fail. -- Peter Lynch

How can you construct a stock portfolio with a 12-15% return? How many stocks should you hold?

One of the principles that Peter Lynch can tell ordinary investors right away is: if you can control yourselfDon't hold 1400 stocks like him, because you don't have as much money as he does, and you don't have to abide by the investment restrictions of all kinds of public funds.

More than a thousand stocks is a bit of an exaggeration, so how many are appropriate in our portfolio?

For a long time, there has been a debate between decentralized investment and concentrated investment among investors. Some people insist on "putting all the eggs in one basket", while others think that "do not put all the eggs in one basket, because there may be loopholes in this basket".

In this regard, Peter Lynch's position is that if the basket he holds is Walmart Inc stock, then he will certainly be more than happy to put all his eggs, that is, all the money, in it; but if the basket he holds is not so reliable, then he is not willing to risk putting all his eggs in this broken basket.

That is to say,The key to investment is not to determine the reasonable number of shares held, but to investigate and determine the quality of each stock one by one.

From his personal point of view, investors should hold as many stocks as possible that meet the following conditions:

(1) your personal work or life experience gives you a deep understanding of this company.

(2) through a series of standards, you find that the company has exciting prospects for development.

After doing a lot of homework, you may find that there is only one stock that meets these conditions, or there may be a dozen or so. In short, the number of stocks does not matter, the key is the quality.

Peter Lynch stresses that it is useless to diversify your portfolio into stocks you don't know, and that doing so may make you regret it.

But he also said that although you should focus on investment, it is not safe to bet all your money on one stock, because even if you have done your best to do research and analysis, but the company you choose is likely to suffer a severe blow that you didn't even expect.

So, Peter Lynch thinksIt is appropriate for a small portfolio to hold 3-10 stocks.In this way, the appropriate diversification of investment may bring you the following benefits compared with concentrated investment:

(1) if you are looking for 10x shares, the more stocks you hold, the more likely you are to have a 10x share in these stocks, and the last big dark horse is often unexpected.

(2) the more stocks you hold, the more flexibility you have to adjust your capital allocation between different stocks, which is an important part of Peter Lynch's investment strategy.

How does Peter Lynch structure his portfolio?

To get rid of good stocks that make money and hold bad stocks that lose money is tantamount to pulling out flowers and watering weeds. -- Peter Lynch

Some people think that Peter Lynch has achieved great success in investing because he is very good at investing in growth stocks, but Peter Lynch himself says that is only half right.

Because his investment in growth stocks has never exceeded 30-40% of the fund's assets.Most of the rest of the money is invested in other types of stocks:Among them, about 10-20% of the fund assets are invested in the stocks of stable growth companies, about 10-20% of the fund assets are invested in the stocks of periodic companies, and the rest of the fund assets are invested in the stocks of troubled reverse transformation companies.

Although I have a total of 1400 stocks, but half of the assets of my Magellan fund are invested in 100stocks, 2Universe 3's fund assets are invested in 200stocks, and 1% of the money is scattered in 500 stocks that are only second-rate investment opportunities at present but have the potential to become first-class investment opportunities in the future. I regularly monitor and track the development of these stocks. "

Peter Lynch has been looking for opportunities in all types of stocks.For example, when he finds that there are more investment opportunities in distressed reverse companies than in fast-growing companies, he will increase the proportion of distressed companies in the portfolio. Or, for example, if a new bullish situation in a stock that he used to see as a second-rate investment opportunity boosted his confidence, he would increase the investment weight of the stock to the level of his major holdings.

How else can we reduce the investment risk of the portfolio?

If there is a stock I don't want to buy, it must be the hottest stock in the hottest industry. -- Peter Lynch

In addition to diligent research, Peter Lynch believes that diversifying money into several different types of stocks can also greatly reduce the risk of a portfolio. Stocks of slow-growing companies have low risk and low returns because investors have lower expectations for earnings growth and correspondingly lower share prices.

Stocks of stable growth companies are stocks with low risk and medium return.Suppose you own Coca-Cola Company's stock, then if everything goes well in this company next year, you may earn 50%, but if everything goes wrong, you may lose 20%.

The stocks of hidden asset companies are low-risk and high-return stocks.But only if you can determine the true value of the hidden asset. If the analysis of the stock of a hidden asset company is wrong, you will not lose much, but once the analysis is right, you will get a high return of 2 times, 3 times or even 5 times.

The stock of a periodic company may be either a low-risk, high-return stock or a high-risk, low-return stock.It all depends on how accurately you predict the company's business cycle. If your prediction is correct, you may gain as much as 10 times, whereas you may lose as much as 80-90%.

At the same time, 10x shares may also come from stocks of fast-growing or distressed reverse-transition companies, both of which are high-risk, high-return stocks with as much potential to rise and as much potential to fall.

If the business of a fast-growing company changes from rapid growth to a weak recession, or if a company that has been in trouble and has successfully reversed its recovery gets into trouble again, the stock price will fall to the point where you lose all your money.

There is no suitable way to quantify the risks and returns of an investment, Peter Lynch advises.When designing one's own investment portfolio, two stable growth stocks should be added so as to balance the huge investment risk of holding four fast growth stocks and four troubled reverse transition stocks to a certain extent.

I have to emphasize it again.The key is to buy only the shares of companies that you really know clearly.Of course, a reasonable purchase price is also very important.If you buy a stock at an exorbitant price, even if the company succeeds later, you still can't make a penny from the company's stock. This kind of tragedy can only persuade you to be sorry for your loss.

Specific analysis of specific situation

Finally, Peter Lynch saidYour portfolio design may need to change with age.Young people still have a lifetime to make a lot of money in the future, so they can use more money to chase 10x shares, even if they make some mistakes, until they find a super bull stock and make a great investment career.

But those elderly investors had better not do this, they need to earn a steady income from stock investments to make ends meet. In addition, the conditions and conditions of each investor are often very different, so each investor can only further analyze how to construct a portfolio that meets his own needs according to his own situation.