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how did peter lynch manage to outsmart the wall street what are you going to do when the stock you bought for 14 went to six dollars and for how long are you going to fall victim to those harsh economic conditions everyone thinks of a market crash as chaos unfolding but no one knows the underlying secret which peter lynch explains passive income peter lynch was a legendary mutual fund manager at fidelity magellan fund he achieved a 29 annual return absolutely crushing the stock market over 13 consecutive years during that period he managed to grow the fund size from 18 million to 14 billion dollars afterwards he retired early at 46 years old and now mr lynch is sharing with us how to make millions during stock market crash you should study history according to peter lynch history is the most important thing you learn from now what you learn from history over the years is the fact that the market goes down and it actually goes down quite frequently the math is simple for example let's take the 20th century the market had 50 declines of 10 or more so once every two years the market falls 10 this phenomenon is also known as a correction now out of those 50 declines 15 have been 25 or more and that's also popularly known as a bear market that means we had 15 declines in the last 93 years of 25 or more also meaning that after every six years the market historically is going to have a 25 decline that's all you need to know you need to know that sometimes the market is going to fall and according to lynch if you're not ready for that you shouldn't own stocks it's actually good when the market comes down for example if you like stock at fourteen dollars and it goes to six dollars that's some serious good news according to lynch when you look at the company and its balance sheet and you find out that they're doing great you're hoping to get to twenty two dollars with it fourteen dollars to twenty two dollars is terrific and six dollars to twenty two dollars is an exceptional result you actually take advantage of these declines instead of crying over why they're actually happening take advantage of the volatility in the market by simply knowing what you own one thing is for certain they're going to happen but no one quite knows when they're going to happen don't buy a stock based on temporary circumstances a lot of times people buy on the basis of how much a stock has gone down over time instead of understanding the stock more deeply most of the time this is why people get themselves in trouble peter lynch explains how polaroid went down when polaroid went from 130 to 100 everyone was saying that here's a great company with a great record everyone wanted to get their hands on that polaroid stock but within a year it went down to 18 moreover this was a company with no debt which tells us that the company was overpriced and it had to go down when lynch was in his first or second year of fidelity kaiser industries had won from 26 dollars to 16 a share and at that moment fidelity invested one of the largest blocks ever bought in the american stock exchange then it went to ten dollars then it went to six dollars then five then four and at last three dollars at three dollars lynch figured out that there was something wrong with the case or industries that is because kaiser industries owned forty percent of case of steel they also owned forty percent of kaiser aluminium and they even owned thirty two percent of cases cement they own case of broadcast and they also own case of sand and gravel and caser engineers they own jeep and they owned business after business and they had no debt which means that there were every possible reason to invest in them it's extremely rare to go bankrupt when you have no debt under your belt but you never know when your lucky star goes behind those dark clouds so it was not long when the whole company was selling at 75 million dollars and at that point it was equal to buying one boeing 747.
so the mighty kaiser industries had to give away all their shares to their shareholders they had to give away the shares of keizer cements they passed out the shares of kaiser aluminium they passed out the public shares in case of steel and they gave out all the other shares you get about fifty dollars per share the point is that if you didn't understand the company and you're buying on the basis that the stock went from twenty six dollars to sixteen dollars and then it went to ten dollars what would you do when it went to nine dollars what would you do when it goes to eight dollars what would you do when it goes to seven six or five dollars this is the problem people have they simply sold stocks because they didn't know why they bought it it went down and they don't know what to do about it simple as that so what do we do when we see volatility in the markets volatility in the markets today according to peter lynch volatility is not something to be afraid of value investors should try to make the most out of it the market is going to go up and down human nature has not changed a lot since 25 000 years ago what's important are the callers because they play a pivotal role in keeping the market stable volatility is a great opportunity for people who know what they're going for if they don't understand what they're owning they can always go for those mutual funds they can try to keep mutual funds and keep adding to it basic corporate funds have grown about eight percent per year so corporate profits double about every five years and the stock market ought to double every nine years there is one thing about markets you can always use history to predict if the market is going to go up or down all you need to remember is a simple fact if you put one thousand dollars in the market all you can lose is one thousand dollars and all you can make is five thousand dollars ten thousand dollars and twenty thousand dollars if you're looking to make millions in the market crash grab our free ebook in the description below it will help you to understand the six different stock categories that are important for every value investor to analyze and seize those once in a lifetime opportunities remember that free knowledge is all you need on your journey to financial success to begin with what do you think about market volatility have you ever invested during a bear market or are you planning to invest during a market crash for more updates on financial literacy
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