Opinion – Grain for Grain: Do you have the Lynch qualities to be successful investing in stocks?

Wrongly, many attribute Warren Buffett as the top-performing stock investor. In fact, in his role as an equity fund manager, Peter Lynch outperformed Buffett. Lynch believed that individual investors could also be successful, but for that, they had to have 12 qualities.

the background fidelity Magellan Peter Lynch’s company had an average annual return of 29.2% between 1977 and 1990. Over the same period, Buffett’s Berkshire company had an average annual return of 27.3%.

In your book, One Up On Wall Streetfirst published in 1989, Lynch lists 12 personal characteristics that an investor must have to be successful in the stock market.

I list the 12 characteristics below and comment below:

1. Patience;
2. Self confidence;
3. Common sense;
4. Pain tolerance;
5. Open mind;
6. detachment;
7. Persistence;
8. Humility;
9. Flexibility;
10. Willingness to research;
11. Willingness to admit mistakes;
12. Ability to ignore general panic.

At first glance, they are qualities that could be evaluated as simple to follow. However, those who have invested in the stock market know that they are extremely difficult to maintain.

You need to be patient to wait for the results of your investment to mature. Often you will need to persist, as it sometimes takes years for the comeback to occur. To do that, you need to have confidence in your research and you need to carry out this research.

You need to have common sense to make decisions and not get carried away by market movements, that is, be able to ignore general panic.

An open mind and humility to assess whether you are wrong in your previous research is critical.

When you’re wrong, have the flexibility to change and the willingness to admit that mistake. Many investors fail, holding losing positions, as they don’t admit the mistake and don’t have the flexibility to change. Therefore, you should not cling to your positions.

As Lynch warns, it is important to be able to make decisions without all the information available.

These are habits that are not acquired by simply turning a switch. Takes time.

Note that one of the characteristics is related to research. This means that it is not enough for you to buy a share and be patient. You will need to study a lot about the company, its finances and its competitive advantages.

One way to start is by following a recommended portfolio and understanding the reasons for portfolio selection. Also, you can invest in a stock fund and monitor the decisions that were made, their reasons and how they were made through monthly reports and conferences. Learning from professionals in practice can avoid mistakes.

Michael Viriato is an investment advisor and founding partner of Investor’s House

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