Peter Lynch: How to Invest Like a Pro (Most Recent Interview)

Now when somebody reports earnings, it's telecast all over the world. They have an investor presentation; they show a balance sheet. So information is much better. So theoretically, the individual's edge has improved in the last 23 years versus the professional in the stock market. The most important organ is the stomach; it's not the brain. There's always, on the way to work, the amount of bad news you can hear is almost infinite now.

So the question is, can you take that? I mean, do you really have faith that 10 years, 20 years, 30 years from now, common stocks are a place to be? If you believe in that, you should have some money in equity funds. I mean, it's a question: what's your tolerance for pain? I mean, the stock market's a very good place to be, but I can toss a coin now; it's gonna be lower two years from now, higher? I don't know. More people lost money waiting for corrections and anticipating corrections than the actual corrections.

Well, you ought to look in the mirror every day and say, "What am I going to do if the market goes down 10 percent? Let me do if it goes down 20. Am I going to sell? Am I going to get out?" If that's your answer, you should be reducing it today.

Well, I had this perfect record. I think the 13 years I ran Magellan, the market went down nine times 10 or more. I had a perfect record; I went down more than the market every time I went down. I went down more. So I just didn't worry about it. The point is, you would say to yourself, "Do I need this money in a year? Do I need this money in two years? Do I need this money in three years?"

So my longer-term stock market's been the best place to be last 10 years, last 30 years, last 130 years. But if you need the money in one or two years, you shouldn't be buying stocks; you should be in a money market fund.

Well, I think emerging markets—that's not my expertise—but I mean, these markets have been really hammered, you know? A lot of countries are doing a lot better, you know? I mean, so I think there's potential there. That's not my expertise, but I think emerging markets could be a place to research. I never looked at the economy; I want to find out. The only thing I look at is what's happening right now, you know? What's going to happen a year from now? What's going to happen with interest rates?

I'd love to get next year's Wall Street Journal; I'd pay an extra dollar for it. That'd be very helpful. I don't know what's going on in the future, but I want to find right now.

Well, I think anybody that's investing in the stock market that's not saying you buy a company—these are not lottery tickets. Behind every stock, there's a company. If the company does well over time, the stocks do well and vice versa. You have to look at the company; that's what you're researching. That's what you do at Valley; that's what I do.

You could be an interventional cardiologist, and you're putting in Abu Med's Impella. You say, "Wow, this really is an incredible breakthrough preventing shock, preventing, you know, hemodynamic support." It's amazing, it's a breakthrough; it's great. It works. But you're actually using it. I mean, or you're assisting; you're in the operating room seeing this breakthrough. That's, you know, you start way ahead of most people. That's an edge; you need an edge on something.

Well, the data now is so good. I remember when Nike—we owned Nike—we had to wait for the mail to come to our library. Now when somebody reports earnings, it's telecast all over the world. They have an investor presentation; they show a balance sheet. So information is much better. So theoretically, the individual's edge has improved in the last 20, 30 years versus the professional. The data is there; it's free.

But I think a lot of people, they promise—they have so many prejudices, so many biases—they won't look at a railroad, they won't look at an oil company, they won't look at a steel company. You know, they're only going to look at companies growing 40 percent a year; they won't look at turnaround. So one thing—you just don't have so many pressures and biases. I bought companies with unions; you have to really be agnostic.