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5. Ten dos and don'ts from Peter Lynch
- Know what you own and own what you know.
- Buying stocks without studying the numbers is like betting without looking at your cards.
- Buying a company with mediocre prospects just because the stock is cheap is a losing technique.
- Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what's actually happening in the companies in which you've invested.
- You won't improve your results by pulling out the flowers and watering the weeds.
- In the long run a portfolio of well-chosen stocks will always outperform a portfolio of bonds or a high interest account. A portfolio of poorly-chosen stocks will do worse than money left under the mattress.
- Just because the price goes up, doesn't mean you were right. Just because it goes down doesn't mean you were wrong.
- You need only find a few good stocks to make a lifetime's investing worthwhile.
- Ignore the herd.
- There is always something to worry about.
Extracts reprinted with permission from One Up on Wall Street, by Peter Lynch, Penguin Books 1989.
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