Editor's note: Investing doesn't have to be complicated. In fact, Pete Carmasino, the chief market strategist at our corporate affiliate Chaikin Analytics, says that keeping it simple might help you make more money (and lose less). In this piece – which was published in yesterday's issue of the free Chaikin PowerFeed e-letter – Pete explains why sticking with what you know is the smartest long-term investment strategy...
Where to Put a Simple Investing Mantra to Work By Pete Carmasino, chief market strategist, Chaikin Analytics
As a first-year caddie at Brae Burn Country Club, Peter Lynch made $2 per round... Lynch was only 11 years old. And yet, men four times his age turned to him for golf tips. He'd help the golfers with their putts. He'd tell them the right club to use to clear the water. And he'd make sure they thought about everything from pin placements to wind speed. Even at a young age, Lynch knew what he was talking about. And the men listened. It didn't take long for Lynch to become a go-to expert on Brae Burn's course... By the time he got to high school, golfers would seek him out. They'd want him to carry their bags. And he'd make $10 for doing that through two rounds each day. As Lynch recalled to Sports Illustrated in 2000... My friends who had newspaper routes couldn't make that in a week. Lynch was inducted into the Caddie Hall of Fame last November. The Western Golf Association honored him at a black-tie affair in Chicago. But as an investor, you likely recognize his name from what he did off the course... You see, Brae Burn is in a well-to-do Boston suburb. Lynch helped many lawyers, doctors, and businessmen with their golf games. And during their rounds, the men would often talk about their latest stock picks. The course-side banter intrigued Lynch. So he started charting stocks himself. Lynch earned the Francis Ouimet Caddie Scholarship. That gave him $300 per year toward the $1,000 tuition at nearby Boston College. He paid the rest with his caddie money. In 1965, Lynch joined investment giant Fidelity. And the rest is history... But as I'll explain today, his success came down to one simple idea. It might seem obvious at first, but it's one of the most important strategies you can use as an investor...
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He managed Fidelity's Magellan Fund from 1977 to 1990. During that time, the fund grew from about $18 million in assets to $14 billion. It averaged a 29.2% return in that span. In other words, Lynch went from caddying to managing the world's best-performing fund. His life story is one of success. He thrived because of common sense and a keen eye for opportunity. And he also followed a basic mantra during his decades in the business... Invest in what you know. This idea has guided countless investors. It has helped them navigate the complex world of stocks. And I've always used it when people ask me how to begin investing. The core of Lynch's philosophy is straightforward... Put your money to work in companies, products, or ideas you understand and use yourself. If you notice a new product or service is gaining popularity in your area, investigate it. That product or service might be worth investing in. Lynch believed everyday observations could lead to rewarding investments. And importantly, he would try to find them before they caught the eye of Wall Street pros. In 1989, Lynch wrote One Up on Wall Street. It's the first book I ever read about investing. And over the years, I've taken Lynch's advice to heart. You can, too... Start in your pantry. I bet you'll find dozens of products from publicly traded companies on your own shelf. These companies won't always be worth buying. But that's why you dig deeper. The Power Gauge can help you along this path, too... This is a tool we use at Chaikin Analytics to gather a wide array of investment fundamentals, technicals, and more into a simple, actionable rating such as "bullish," "neutral," or "bearish." And just recently, the Power Gauge turned "bullish" on the Consumer Staples Select Sector SPDR Fund (XLP). We use this exchange-traded fund ("ETF") to track the consumer-staples sector in the Power Gauge. XLP has also recently been strong relative to the S&P 500 Index for the first time since January 2023. Right now, only seven stocks in the ETF earn a "bullish" or "very bullish" rating. And that's out of 36 rated stocks. So, it's important to be selective. But now might be the time to take a look around your pantry... and put Lynch's philosophy to work. Good investing, Pete Carmasino
Editor's note: Chaikin Analytics founder Marc Chaikin has predicted almost every move in the U.S. market since the COVID crash in 2020. Now, he's coming forward to share his latest prediction... In short, he believes a new wave of volatility is heading straight for U.S. stocks. But that doesn't mean it's time to panic and sell. In his latest online conversation, Marc detailed what his Power Gauge system is saying right now... what exactly is coming next... and how to protect your portfolio. Click here to learn more. Further Reading "People often make clouded judgments in down markets or periods of uncertainty," Chris Igou writes. That's why it's smart to use helpful investing tools. They'll help save you – and your wealth – from yourself... Learn more here. The recent volatility has some folks questioning their long-term goals. But it's all about owning the right stocks. Here are five important traits to help you find the best of the best... Read more here. |
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