Investment philosophy[edit]
Lynch has written (with co-author John Rothchild) three texts on investing, including One Up on Wall Street (ISBN 0671661035), Beating the Street (ISBN 0671759159), and Learn to Earn. The last-named book was written for beginning investors of all ages, mainly teenagers. In essence, One Up served as theory while Beating the Streetis application. One Up lays out Lynch’s investment technique including chapters devoted to stock classifications, the two-minute drill, famous numbers, and designing a portfolio. Most of Beating the Street consists of an extensive stock by stock discussion of Lynch’s 1992 Barron's Magazine selections, essentially providing an illustration of the concepts previously discussed. As such, both books represent study material for investors of any knowledge level or ability.
Lynch also wrote a series of investment articles for Worth magazine that expand on many of the concepts and companies mentioned in the books
Lynch coined some of the best known mantras of modern individual investing strategies.
His most famous investment principle is simply, "Invest in what you know," popularizing the economic concept of "local knowledge". Since most people tend to become expert in certain fields, applying this basic "invest in what you know" principle helps individual investors find good undervalued stocks.
Lynch uses this principle as a starting point for investors. He has also often said that the individual investor is more capable of making money from stocks than a fund manager, because they are able to spot good investments in their day-to-day lives before Wall Street. Throughout his two classic investment primers, he has outlined many of the investments he found when not in his office - he found them when he was out with his family, driving around or making a purchase at the mall. Lynch believes the individual investor is able to do this, too.[14]
Lynch has also argued against market timing, stating: "Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in the corrections themselves."[15]
Lynch popularized the stock investment strategy “GARP” (Growth At A Reasonable Price)[16], which is a hybrid stock-picking approach that balances Growth investingpotential with the discipline of Value investing. Many well-known funds now follow the GARP model, ranging from equity funds such as Fidelity Investments Fidelity Contrafund (FCNTX) and Lemma Senbet Fund, to index funds such as Russell Indexes iShares Russell 1000 Growth Index[17].
He also coined the phrase "ten bagger" in a financial context. This refers to an investment which is worth ten times its original purchase price and comes from baseballwhere "bags" or "bases" that a runner reaches are the measure of the success of a play.[18] A player who hits a home run with bases loaded (all three bases occupied by runners) will bring in ten "bags."
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