At an investment conference in 2005, he gave a checklist of 8 fundamental principles that he used in his stock picking. I think there's a lot to learn from the following 8 items:
1. Know what you own. This advice seems so simple, but is actually rarely followed by many investors. If you own mutual funds or ETFs, do you know what the fund is invested in or what the ETF is actually tracking?
2. It is futile to predict the economy and interest rates. Doing so is characteristic of short term and emotional trading. It can be important to understand these things, like he says, they're difficult to predict.
3. You have plenty of time to identify and recognize exceptional companies. So many people are worried about getting into an investment at the best and most opportune time. Take your time to research and look into any investment your considering. You'll always have enough time to do enough research if the investment is worthwhile. There will also always be another good investment. If you missed Microsoft or Google, don't think there will never be another good investment.
4. Avoid long shots. I think it says enough.
5. Good management is very important - buy good businesses. Even the greatest business concepts can fail with the wrong team in place. Mediocre businesses can also be outstanding with the right leadership. Take Steve Jobs and Apple for instance. Look at the companies' performance with and without him at the helm. It speaks volumes.
6. Be flexible and humble, and learn from mistakes. This is good advice not only for investing. Realize you're going to make mistakes and make it a point to learn from them.
7. Before you make a purchase, you should be able to explain why you're buying. If you can't explain your reasoning, you probably don't understand the investment, and you shouldn't invest in things you don't understand. Most people hear this, throw their hands up, and don't invest. Instead, take the time to try and understand the business if you're interested in it, and then buy it if it makes sense.
8. There's always something to worry about. Nothing is a ever a sure thing. Don't wait for something to be perfect, just put in your due diligence to alleviate and mitigate your risk.We can learn a lot from these principles, especially since they come from such a successful investor. I also like a couple of Peter Lynch's quotes. They can also teach a lot:
"Go for a business that any idiot can run - because sooner or later, any idiot is probably going to run it."(McDonald's is a great example of this)"If you stay half alert, you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall, and long before Wall Street discovers them."(Look at everyday products you and others are buying)We can learn a lot from successful investors such as Peter Lynch. Hopefully some of his strategies will be helpful as you begin and continue to invest.