Invest $1,000 in a clunker and in the worst case, maybe you lose $1,000.

Why is this? Your losses are limited to the amount you invest in each stock (it can’t go lower than zero), while your gains have no absolute limit. In my experience, six out of ten winners in a portfolio can produce a satisfying result. My clunkers remind me of an important point: You don’t need to make money on every stock you pick. Liking a store, a product, or a restaurant is a good reason to get interested in a company and put it on your research list, but it’s not enough of a reason to own the stock! Never invest in any company before you’ve done the homework on the company’s earnings prospects, financial condition, competitive position, plans for expansion, and so forth. An amateur investor can pick tomorrow’s big winners by paying attention to new developments at the workplace, the mall, the auto showrooms, the restaurants, or anywhere a promising new enterprise makes its debut. I mention Microsoft and Cisco to add contemporary examples to illustrate a major theme of this book. If you can follow only one bit of data, follow the earnings-assuming the company in question has earnings. Market pays for a stock today or next week doesn’t tell you which company has the best chance to succeed two to three years down the information superhighway. If my favorite Internet company sells for $30 a share, and yours sells for $10, then people who focus on price would say that mine is the superior company. To me, this barrage of price tags sends the wrong message. To my mind, the stock price is the least useful information you can track, and it’s the most widely tracked.

The typical big winner in the Lynch portfolio (I continue to pick my share of losers, too!) generally takes three to ten years or more to play out.

I own stocks where results depend on ancient fundamentals: a successful company enters new markets, its earnings rise, and the share price follows along. I’ll share my highlights from the book and add context when needed. Simplifying complex things and making them obvious. One of the reasons or perhaps the biggest reason I like to learn from Peter is because he has a way of communicating his common sense in an understandable way. This is the second book I read Peter Lynch, which is one of my favorite investors.

Summary of one up on wall street