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so my best stocks were going 18 to 8 then to sometimes to 40 and some are gone from 18 to zero but at least i wasn't adding to it on the way to zero peter lynch is up there with the greatest investors of all time with his investment fund generating an average annual return of a whopping 30 from 1977 to 1990.
and in today's video i have some clips from one of his latest interviews in which he discussed a variety of investment topics including advice for young investors so if you are someone who is looking to broaden your understanding of stock market investing then you definitely want to pay attention to this interview i put a ton of effort into making this video and going through and collecting clips that i think are valuable from this interview take two seconds to leave a like on the video and hey if you get a ton of value out of today's video consider hitting that subscribe button but with that said let's jump into the first clip what do great managers do well there's there's two types you have fred smith who comes up an idea called federal express right then he had to grow it and that's really tricky sometimes people can just do the idea part he did all the parts right then as lee iacocca had turned around to trouble with chrysler and and even more challenging a giant company like general electric to make something good better i mean that's really hard so all these people basically were problem solvers and they and they had to manage people and one of the things that surprised people they don't understand the definition of management it's getting things done through others it's a lot easier to do something yourself if you have somebody else do it lots of people obviously you're managing people and sometimes you have to encourage them sometimes you have to just push them a little harder but you have to understand what they want you have to work with them you have to explain yourself you have to set goals and you have to be a leader yourself and you have to put a lot of effort into it and you have to be make say make mistakes and there's a real amazing difference between being persistent and being stubborn and i think great leaders to say this is persistence is good stubbornness assistance is terrific that was terrible but one of the first things that peter lynch talks about in this interview is what he describes as a great manager and the reason why he's talking about this is because assessing the management team in an investment in a company that you're looking to invest in is a critical part of the analysis process because ultimately these are the people who are making decisions on a day-by-day basis within the company on your behalf because while we are owners and if we had owned 51 of the shares then we could make managerial decisions within the company but as a little fish we only have a few shares out of maybe millions of shares and as a result we are reliant on the current management team in place to make good decisions and then be honest with us and relay that information back to us in a transparent way and while we may not have the access that someone like peter lynch did in the 70s and 80s where he had such a big portfolio that he could just set meetings with the management team for the companies he wanted to invest in there are many things that we have access to today that peter lynch just didn't have access to immediately and that is really because of the access the internet has provided we get instant access to a bunch of different things on the investor relations page of the company's website and we can use a few of these things a few of the information that comes out from the company to assess the management team and the main things that i personally use are the letter to the shareholders that the ceo or the chairman writes every year with the annual report as well as the conference calls that usually companies do quarterly or at least once per year in most cases and the reason why both of those things are really valuable for assessing management is because you can really see whether the management team is just trying to pitch you to buy more shares or whether they are the kind of ceo who is just being honest about what is happening with the company obviously praising the company when they do things well but also being honest about the realities and the challenges that the business is facing and how they are planning on overcoming those things in the future you can also look through the investor presentations because what management teams will do a lot of the time is they will set one or three or five year targets and what you can do to assess whether management is good at setting and then hitting the goals that they set out to do is you can just go back and look five years into the past 10 years into the past and see what goals they were setting whether they talk about them in the lead to the shareholders on the conference calls or in the investor presentations and through looking through what goals they set you can see if the management team is accurate in projecting forward and that way you can know whether you can actually rely on what the management team is telling you in the present day i mean i know lots of people who are doing stunningly well in the world of investments in finance and they do it by a study of macroeconomics right right you never bought into that i always do i was bottom down i mean and one i was lucky i mean i i owned a lot of mo i own american motorings hospitality means united inns right right and they all and i said who's your best competitor and they said la quinta motorist oh i remember this yes and it was i i owned it before sunset if somebody ever says something nice about a competitor you know it's true they always dump in the comments yeah if you get them to say what they worry about somebody's doing it maybe better than i am they have a better form we can't match it for him yeah so i i basically then visited and i made it a big position magellan was a huge success how long did you stay with it i think seven or eight years i really enjoyed this clip from peter lynch here where he describes himself as a bottom down investor and what he means by that is if you're a macro investor if you're someone who cares deeply and and focuses on i should say uh the broad economic changes interest rates the changes in government big things that impact the overall economy then you would be considered a top-down investor someone who likes to look from the top and then slowly work their way in someone who is analyzing individual businesses as a value investor in many ways you would probably describe yourself as a bottom-up investor meaning you start with the company and then work your way outward looking at competition and then seeing how that business operates within the economy but peter lynch describes himself as bottom down meaning he doesn't care at all about the macroeconomics he doesn't care about considering the changes in government or interest rates or inflation in his investment the only thing he cares about is the bottom which is the specific company that he's investing in and this approach makes a lot of sense if you have a long horizon because while macro economics interest rates inflation these kinds of things while they do impact stock prices over the course of five years or over the course of two years over the course of 10 15 20 years generally speaking let's say in the united states you will have some democrats in power you will have some republicans in power taxes may go this way taxes may go that way regulations may go this way regulations will go that way inflation may go up it may go down interest rates may go up interest rates may go down but what will actually drive the stock price for the most part over that period even though there might be bumps in the road what is driving the stock price is the profits that the business produces so if you have a long-term perspective your really only focus and core focus should be what do you think the profits of the business should be or will likely be over the next 10 15 20 years before we get into the next clip today's episode is sponsored by sharesight which is the portfolio tracking software that i've personally been using over the past four years to track the performance of my portfolio sharesight allows you to track all of the different types of gains that you experience as an investor from capital gains dividends if you have dividend reinvestment plans it will do all of those calculations for you and then currency gains if you're buying shares internationally or you hold foreign currencies sharesight also generates up to 10 different reports that can be used for things such as tax in terms of capital gains and dividend income performance tracking and diversification reporting and analysis you can benchmark your portfolio against a huge list of indices and the best part is they currently have a free account option which you can use forever without paying a cent so if you want use the link in the description below or the link on screen in order to sign up for a paid plan or a free plan the free plan you can use forever if you do sign up to a paid plan you get extra features of course and you get four months off a yearly subscription at the moment if you use my link that is a great deal and i've been using sharesight as i said for the past four years and it is a really really valuable way to accurately see what kind of return your portfolio is generating how do you know when to get out well in baseball analogy and i know you're a baseball field you want to get in in this first second third inning not when they're drawing out the lineup and walmart you could have bought walmart wait wait wait you don't want to do it when they're drawing up the lineup you want to make it to the second third and you want at least i've seen them at bat they've got it right they got the formula right and now there's it's it toys r us on 20 stores on the way to 500 or home depot on 40 stores on the way to 4 000.
you could about walmart 10 years out they went public then it went up 50 fold it's already up tenfold that's 500 fold yeah 10 years after the republic they're only in 18 the united states they went to 1920. so you say yourself there's a lot of room to go but when you're in every state when limited got to every single mall in the united states yeah with express unlimited you say yourself they're in the eighth and ninth inning where can they go yeah so that's how you define it well it's cyclical and it goes from crummy to semi-crummy you're happy then it goes to good you're happy and it goes very good you say maybe i'd have gone to something else now the question that the interviewer asked was actually when do you get out and peter lynch answers when to get in but i think this answer is so good and i think the analogy is really really good so he draws the analogy of baseball right which has a number of innings and he suggests that you want to find businesses that are in the second or third innings meaning you've seen them bat you've seen them play a little bit you have a bit of a track record maybe it's 10 years as we'll talk about with some of these examples you've seen the businesses performance for 10 years and it's terrific so you've seen the performance but there is still a long way to go and that's the prime time to get in on an investment where they have a ton of growth in front of them but it's not so early that you're really uncertain about where the business will be in the future and my favorite example that he draws here is walmart and how yes it went up 10x in the first 10 years but even after the first 10 years of being listed on the stock market it went up another 50x which just goes to show you that you really don't need to mess around with these crazy speculative ipos you can just wait for a company to have a good solid 10-year track record prove to us that they have a solid footing in the market and that they've done a good job at fending off competition through a variety of different economic conditions and then if you can buy the business at a good price after it's got a small track record as long as it's still in the second or third or fourth innings and it's not a business that's gone for 10 years and now is going to die as long as it still seems like the business has a long runway to go then you can get in and be very confident that the business is going to continue to deliver good returns in the future i think about this all the time when it comes to new tech companies that are coming out or have been coming out over the past 10 years there are so many businesses think things like airbnb and a number of other businesses that have listed in the past 10 years and right now there isn't much of a track record the businesses have not really been through a lot of them haven't been through tough economic conditions the pandemic of course was very tough for some businesses but not for others but we really don't have a 10-year track record for those businesses but the point is you can wait you can be patient wait for some of these really good businesses or at least they look good in the first couple of years of them being listed wait for them to have a strong track record and then likely after a 10-year period investors will be less hyped about the business because it's no longer a hot brand new business everyone will be onto the new hot stock the stock will probably have a little bit of a better valuation a better price and then you can invest in the business and if you do your analysis right you may be able to find something like a walmart which even after 10 years delivered 50 times your money over the many years that followed all right the other thing is what advice we give to young investors who almost certainly will have more direct responsibility for their retirement savings than their predecessors of which i'm going to talk about later well i think the advantage of putting money into a retirement fund you know obviously a fidelity fund i would prefer but indexing whatever it is put some money aside it's going to compound tax free yeah start saving earlier the numbers are amazing compounding will do good once you want it until you want to invest directly in individual stocks start a paper portfolio say i'm going to buy these 10 companies and then write down in like five votes why what's the reason i bought those and then keep checking a year late what happened did did they really keep growing or did a competitor come along do a paper portfolio and you could do exactly what i did with a real portfolio and find out what am i good at what am i bad at am i really good at turnarounds i'm good at small growth companies maybe i pay too high for stocks you can do this very you can do this over five years and learn what's your skills and then specialize that in this last clip peter lynch talks about some advice for young investors how he would approach things if he was just getting started and he talks about a couple of things the first is that you should utilize or maximize the retirement counts that give you tax-free benefits or tax sheltering and i think that is absolutely so true whether you have a superannuation fund in australia or you have a roth or a 401k in the united states or wherever you are in the world figure out and learn about your particular tax benefited or tax sheltered retirement accounts and max them out because there's really in most cases no reason why you shouldn't be maxing those out and achieving the benefits of putting money away for the long term and receiving the tax benefits then he says something interesting which i'm not sure i entirely agree with but he suggests that you should pay per trade for about four to five years if you are too early to get started investing and i mean if you're really young if you're like 16 years old or maybe if you're 18 but you're just not ready to put money into the market then i can i understand and appreciate the idea behind wanting to pay per trade over a few years but the problem i have with paper trading is with the investing style that peter lynch endorses and that i talk about on the channel and that i use in my portfolio we're talking about investing in companies for 5 10 15 or maybe even longer years and unless you're willing to hold a business over that period i mean in the short term anything can happen so if you're paper trading for say one year and you make a bad return that doesn't mean you're a bad investor as i said in the first 18 months of my thor industries investment i was down massively in that position over 50 percent but it didn't mean that i had made a bad investment decision it just shows that in the short term great stocks can be severely undervalued and it took a couple of years for that stock to realize its value and turn into what now looks like a very very promising and good investment so i'm not sure that paper trading makes a lot of sense if you are a long-term investor what i think does make sense is getting involved in the markets so whether that's through retirement funds or whether that's using index funds and setting up a plan to consistently contribute to the market and then from there once you have money flowing into the market broadly that you don't have to worry about you can then spend your time researching and trying to find that first good individual investment and all i would say is just be patient it can take a while for you to find a really good investment opportunity don't drop your standards just to try and invest in a bunch of different businesses because sure if you invest in some random companies you don't understand sure you might make some money in the short term but as we've spoken about earlier over the long term it will just hurt you because you won't know how to manage that investment so with that said i hope you guys got some value out of today's video and if you did hit subscribe if you want to stay up to date with more content in the future and as i mentioned in the middle of the video if you do want to check out sharesight you can get four months off a yearly subscription if you use the link down in the description below and of course you can also use that link and just sign up to a free plan and try it for as long as you want so if you just want to test it out and try out some of the basic features go use that link and sign up for free but with that said hope you guys have a great day and i'll see you in the next video
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