As a superstar in the investment world, Peter Lynch has also experienced many stock market crashes. The U.S. stock market plummeted in 1987 when he was managing more than $ 10 billion in the Magellan Fund. Within a day, the fund’s net asset value lost 18% and the loss was as high as $ 2 billion. He had to choose to sell stocks like everyone else. Since then, Peter Lynch has experienced many stock market crashes but still achieved very successful performance. In the face of the plunge, some of Peter Lynch’s practices are worth learning from.
1. Stay calm during the plunge
First, strengthen confidence and maintain a rational and positive attitude. For Peter Lynch, whenever the Big Picture is worrying and hopeless, he pays attention to the “The Even Bigger Picture” because the latter keep investors awake. “Despite all kinds of disasters that have happened since the 20th century, there have been tens of thousands of reasons to predict the end of the world, but investment stocks still yield more than double the yield on investment bonds. Looking at the stock market, we will strengthen our confidence and invest in stocks for a long time, and the yield will definitely be much higher.
2. Hold firm stocks of good companies
Second, don’t throw out all the stocks at low prices due to panic, and have firm courage for the good company stocks you hold. Peter Lynch said, “If you desperately sell stocks during a stock market crash, the selling price tends to be very low.” Buffett has also warned investors that those who can’t stand a 50% loss in their stock market Investors who still insist on not moving stocks should not invest in stocks.
3. Fully pay attention to the fundamentals of the company
Third, give the company full attention to its fundamentals, adhere to the concept of value investment, and find treasure in a bearish environment. Peter Lynch’s investment in Bandag is the best example. Bandage Corporation is engaged in the business of retreading used tires. Since 1975, dividends have continued to increase, and profits have increased by 17% annually. Despite the continued increase in revenue, Bandage Corporation’s stock price has also been twice during the 1987 stock market crash and the Gulf War. The plunge and this overreaction on Wall Street created a good opportunity for Peter Lynch to buy on dips. After the two big falls, not only did the stock all recover its lost, but it also rose dramatically. Due to the cyclical economic fluctuations, most of the stocks in the stock market will rise or fall with it. In addition to keeping calm and not eager to lighten up, investors must also realize low-risk profits through value analysis.