Peter Lynch on Stock Market

A lot of good advice on these topics:

Upsides of a downmarket.
Historical market rebounds.
Timing the market is not a Winning Strategy.
Why it's important to stay the course.
Don't listen to background noise.
Know your Time Horizon, stay invested.
Benefit of Regular Investing for Retirement.
Portfolio Diversification
Be comfortable with what you own.
How can Fidelity financial planning help you?

Nature of the Stock Market
Market went down 1% per month and 2% per month regularly in the past.
Once in 2 years, market went down 10% per month.
Every 18 months, some market somewhere was down 10% per month.
Once every 5 or 6 years, the stock market declined 20% to 25% per month.

Historical market rebounds
Over the last 15 years, there were 13 months when the market went down 8% or more.
Of these, 11x out of these 13, the market was higher subsequently.

Stay fully invested. Know your time horizon.
The market went down 10 to 12 x, I went down 10 to 12 x.
When market went up I went up.
The upside is more than the downside.
Need to know your own time horizon.

Timing the market is not a winning strategy
All the wealthy people in the world are not market timers.
You might be right to miss some declines.
However, market turned up very fast.
Over the last 15 years, missing the best 15 months (that is 1 month per year) ..
.. meant a fall of portfolio return from 11% to 3%.

Portfolio Diversification
As long as it makes sense.

Peter Lynch Induction and Speech - Academy of Distinguished Bostonians

Peter Lynch talks about bottom-fishing on Wall Street

http://multibaggersindia.blogspot.com/2010/11/investing-strategies-from-peter-lynch.html

Peter Lynch: Market Prediction

Market ought to be irrelevant to your investing.
I made money in lousy market and I lose money in good market.

Investing strategy of Peter Lynch
http://multibaggersindia.blogspot.com/2010/11/investing-strategies-from-peter-lynch.html

Magic of Investing = Compounding

The market is designed for the majority to give to the Minority

The Magic Money Machine

MSCI World P/E ratio

http://www.pimco.com/EN/Insights/Pages/ValueInvestingHumanNatureandtheLastGreatAnomaly.aspx

Public belief about best long term investment

Public beliefs about long term investment returns from different asset classes

Staggering (to me anyway) study out from Gallup a couple of weeks ago about the public’s beliefs about which asset classes offer the best long term investing returns.

 

When asked “which of the following do you think is the best long term investment?” 34% of the 1000-odd telephone interviews picked savings accounts with 33% picking real estate. Stocks and mutual funds crept in at a lowly 15% (see below).

http://www.selfmanagedsuperfund.com/tag/long-term-returns/

Long Term Investing by Uncle8888

http://createwealth8888.blogspot.com/2011/08/investing-made-simple-by-uncle8888-22.html

Tuesday, 9 August 2011

Investing Made Simple by Uncle8888 (22)

Read? Investing Made Simple by Uncle8888 (21)

ST, Tuesday, August 9, 2011

S'pore retail investors make flight to safety. Massive volumes of stocks traded as many prefer cash to equity.

Engineer Sun Weixin, 28, liquidated his entire portfolio of mainly bank and blue-chip shares yesterday, worth less than $40,000. He suffered a loss but did not want to disclose the amount - but said he felt there is too too much uncertainty to stay invested.

Read? investors flock to low-risk assets, with focus on cash

Read? Should I sell all my equities and stay sideline?

Should Uncle8888 also sell out all equities and stay sideline?

Since 2001 he has been thinking very hard each time a Bear market arrived whether he should sell out all his equities and stay sideline until certainty come back to the stock market before reinvesting. This time is no different and he is thinking very hard too.

So actually what has happened to him during the past Bear markets for being stubborn or stupid?

He has been holding the following stocks across several bear markets:

1. Kep Corp since 2001
2. Semb Corp since 2002
3. DBS since 2003

The last Great Bear of 2008/09 didn't crash down Kep Corp and Semb Corp down anyway near his initial purchase price. In fact, his initial purchase for Kep Corp is now cheaper by 10% after 10:1 bonus share issue; and plus a small capital gain and small additional dividends coming from K-Green (dividend in specie).

His initial DBS holding is also cheaper by 16% after the 2:1 right issue; and internally price adjusted for all unit shares based on theoretical fair value of  right issue shares.

There was no corporate action on Semb Corp. :-(

TSR as on Monday closing, 8 Aug 2011
  

For the coming Bear market, he is even more stupid to slide with the Bear with more members on board.

Will Uncle8888 survive this Bear to write more stories on short-term trading and long-term investing using his Pillow stocks strategy and finding Touch Stones?

http://wincrt.blogspot.com/2011/08/create-wealth-through-long-term_09.html

Never Sell A Winner and you end up being a long term investor

I will regularly add to my winners (at ever higher prices), and I will cull the losers from the portfolio during market corrections. But most importantly, it is my intention to never sell my winners.

Warren Buffett didn’t get rich by selling 10% gains on his stocks and companies. He (and his investors) have gotten rich by making “permanent” investments. His timeframe is famously “forever.”

I expect my “forever” to be a very long time. If my investments are in companies that are consistently earning money and growing their businesses, and I stick with them through thick and thin, do you think I’ll be able to outperform the 1% APR I’m earning on my savings account these days? I think so.

http://www.chicagosean.com/2011/03/06/never-sell-a-winner/

Long-term Investing: An Insight

http://www.marinisgroup.com.au/articles/long-term-investing.pdf


This is the first paper in an annually updated series that gives investors an
insight into longer-term returns from various asset classes. It is aimed at
helping investors think carefully about their portfolio decisions. Investors should
understand their personal time horizons for their various investment portfolios
so that sensible, wealth-enhancing decisions can be made. Simplistically, an
investor saving for a home deposit in one year’s time will be focused on capital
preservation, whereas an investor saving for retirement in 30 years’ time will
place greater importance on capital growth and long-term returns. This paper
should be read alongside another Perennial paper, The Wisdom of Great
Investors, which brings together the principles of investing from some of the
world’s greatest investors.


http://www.marinisgroup.com.au/articles/the-wisdom-of-great-investors.pdf


The Wisdom of Great Investors
“If you can keep your head when all about you are losing theirs . . . yours is the Earth and everything
that’s in it.” And what’s more, you’ll be a successful investor!
(Apologies to Rudyard Kipling


The Wisdom of Great Investors brings together the principles of investing from some of the world’s
greatest investors who have not only lived through but also prospered in diffi cult times.
Though each of these great investors offers a different perspective, the common theme is that
a disciplined, patient, emotionally detached investment approach can help you to reach your
long-term fi nancial goals.
At Perennial, we believe their collective thoughts are an invaluable insight into long-term investing
and may help you in preparing your own mindset to successfully build and preserve long-term
wealth.




http://www.marinisgroup.com.au/

Cash Flow Model of Households

Invest long-term ... it can reduce risk

Overview of long-term investors and their key constraints

Are you a landlord?

“Landlording and long-term investing go hand-in hand. Being a landlord isn’t for everyone, but if you have the right personality and decision making skills then it’s a snap.”

Share of income - For Decades, the Richest Pulled Away

Range of Stock Market Annual Returns

Market crash 'could hit within weeks', warn bankers

A more severe crash than the one triggered by the collapse of Lehman Brothers could be on the way, according to alarm signals in the credit markets.

The cost of insuring RBS bonds is now higher than before the taxpayer was forced to step in and rescue the bank in October 2008 Photo: Alamy

By Harry Wilson, and Philip Aldrick

9:50PM BST 24 Aug 2011

Insurance on the debt of several major European banks has now hit historic levels, higher even than those recorded during financial crisis caused by the US financial group's implosion nearly three years ago.

Credit default swaps on the bonds of Royal Bank of Scotland, BNP Paribas, Deutsche Bank and Intesa Sanpaolo, among others, flashed warning signals on Wednesday. Credit default swaps (CDS) on RBS were trading at 343.54 basis points, meaning the annual cost to insure £10m of the state-backed lender's bonds against default is now £343,540.

The cost of insuring RBS bonds is now higher than before the taxpayer was forced to step in and rescue the bank in October 2008, and shows the recent dramatic downturn in sentiment among credit investors towards banks.

"The problem is a shortage of liquidity – that is what is causing the problems with the banks. It feels exactly as it felt in 2008," said one senior London-based bank executive.

"I think we are heading for a market shock in September or October that will match anything we have ever seen before," said a senior credit banker at a major European bank.

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Despite this, bank shares rebounded on Wednesday, showing the growing disconnect between equity and credit investors. RBS closed up 9pc at 21.87p, while Barclays put on 3pc to 149.6p despite credit default swaps on the bank hitting a 12-month high. This mirrored the US trend, with Bank of America shares up 10pc in late Wall Street trade after a hitting a 12-month low on Tuesday over fears that it might have to raise as much as $200bn (£121bn). As with the European banks, the rebound in the share price was not reflected in the credit markets, where its CDS reached a 12-month high of 384.42 basis points.

European stock markets joined in the rally. The FTSE closed up 1.5pc at 5,206 on hopes the chance of a global recession had diminished. European shares hit a one-week high, with Germany's DAX closing up 2.7pc and France's CAC 1.8pc higher. The Dow Jones index edged higher on strong durable goods orders data as markets began to accept that the US Federal Reserve is unlikely to signal fresh stimulus at Jackson Hole this Friday.

Even Moody's decision to downgrade Japan's sovereign credit rating by one notch to Aa3 did little to damage global sentiment, although Tokyo's Nikkei closed down just over 1pc.

As stock market nerves settled, gold - which has recorded steady gains recently as investors seek a safe haven - fell 5.3pc to $1,777 in London.