Peter Lynch "This Is What You Should Do During A Market Crash"

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01. i think the same rules applied 50 years ago applied five years ago apply 20 years from now first of all you have to know what you own whether it's a fund or a stock you have to have a reason for it and you ought to be able to explain to an eleven-year-old in two minutes or less why own this and this sucker's going up is not a good reason i've tried that one it's not a doesn't work well basically you look now you have three choices i think if your investor you can put your money in a money market fund and get one seven one five one six and it's taxed at a forty percent rate can buy a 10-year treasury and get four seven that's taxed at a 40 rate or you can have some equities and i think stocks over the next 10 years will do a lot better than four seven or one seven so i would have some of my money now it's up to the person to decide how much they want in the stock market for some people 10 is aggressive for some people 50 is the right amount it's a personal decision and you can't go by these rules that if you're 25 you should be 100 and if you're 45 you should be 50 if you're 60 it should be zero and it's burping a lot i know what the rules are and people with 60 but they i hate those rules i think they're pathetic they're not lottery tickets i mean when you own a stock it's a share of a company and i think companies are going to make a lot more money in 10 years a lot more money in 20 years and that's that's why they go up that's the only reason some companies don't do well xeroxes make a lot less money than they did 30 years ago it's a lot less well i think not looking at the balance sheet this mistake i've made if you look at you know if you look at a person's balance sheet you look to see what the assets they own their houses they own a house if they own a car what debt they haven't take that away that's what your net worth is you should do that with a company and i've seen i've seen investors look at companies that made let's say you're looking at two companies they're very depressed they're each at four dollars a share but one companies and they're each losing a couple million dollars a quarter one company is 100 million in cash and no debt and one company has no cash and 100 million of debt they're about to blow taps on the second company so you and you can do this you if you get through eighth grade math you get anywhere near eight and eight equals 16 you can do this look at a company's financial position it's impossible to go bankrupt you don't have any debt i mean you get the irving g thulberg lifetime achievement award i think for bad mansion i mean how could you do that well i think my greatest mistakes are you know it's funny in the stock all you can lose is 100 i've done that and your great mistakes are selling a good company and then doubles then it triples and quadruples because you make a lot of mistakes since those ones that go up tenfold like all the 10 baggers so some of my mistakes are saying oh my god this stock is too high and i was wrong and you had to figure out what inning am i in this baseball game i sold toys r us way too early it went up 20 fold after i sold i did the same thing at home depot those are probably my two greatest mistakes ever made well you ought to find out why you bought a stock if you're saying it's a sickle company and they're doing poorly and they're doing awful you wait till things are getting better and they're doing terrific and then you sell it but with a growth company you have to say walmart's case 10 years after they went public you could have bought the stock and made 500 times your money because they still are only in 15 percent of the united states and they could say why can't they go to 17 why can't they go 19 why can't they go to 23.

02. so for the next four decades going around the country so you have to say to yourself in this stock i have a 10-year story a 20-year story i'll be able to write that down and follow that that's what i do with the company and that's your decision that's how you sell it no you still buy a company and you buy a company to grow and if it's a textile company or it's an electronics company a software company you better understand what they do and and if they do well the stock will do well no matter what happens the market if the dow jones today was a thousand or 500 you had made a lot of money mcdonald's you would have made a lot of money johnson johnson you want to make a lot of money gillette these companies earnings have gone up a lot the last 30 years and if the market was 50 000 you would have lost money in burlington industries i recommended that in 1969 i think it's i think it's gone from 34 to 2 with no stock splits these earnings been terrible this is a funny business you don't have to write even five times out of ten if the times you're right you make a double and triple it offsets all those times you lose twenty or thirty percent so when you buy a psyche i say yourself how much can i lose and how much can i make and you ought to be able to make a lot you see stocks are risky i mean look look at how much we've lost on the t look how much less than xerox these were quality companies you know you could lose a lot in stock so i say yourself how much can i make because i want to buy a stock if i'm right i'm going to make a double or triple so you have to be careful i'm looking companies that are selling close to cash they're an industry leader and they're down 95 percent well i think also what they might have to say what do i want do i need the money in a year do you need the money five years you're a terrible investor you need the money in a year if you need for college to send your kids there for a wedding you're not gonna be a good investor then you have to do some homework and say should i have 10 growth funds that's silly you say what do i want i want two or three girl funds what's my mix that i like and you want to say is aggressive you know some people aggressive is 50 so i would say people and some people might want to have foreign funds it's like a menu at a restaurant they should look it over and decide what they like and then stay with it and if one group does well for two or three years the next bunch of money they add to may they should add to the group that's underperforming over time different categories work out to be about the same so you get whipsaw if you're all in one area just poorly for three years you say get me out of that you go to some other area and that does badly for three years you could be in it forever and never make money i think you ought to see some kids you know hire an eight-year-old harvest six-year-old just watch them they don't know who alan greenspan is they know about the shape of the yield curve they're optimistic about the future we'll be fine for the next 30 40 years