Collection: Peter Lynch - #29 'What To Do When The Market Goes Down?'



[Transcript]

MONROE KARMIN 00:00

We’re in the month of October. Beware of the month of October, the witching month of the stock market. What do you see as the outlook for this month? And when do you think the Dow will hit 4,000?


PETER LYNCH 00:16

October’s always been a special month. I remembered In 1987, I was very – you know, I was very convinced the market was not in trouble and I didn’t worry about things. Carolyn and I planned this great golf vacation to Ireland.


We planned to visit one course and stay at a little house and visit another and go all along the west coast of Ireland and play golf. We left on a Thursday night. And the market went down 55 points that day, which was not too good.


And the next day, we got to Ireland because of the time difference, we had completed our day. I got back to the hotel and called in. The market had gone down 112 on Friday. I said to Carolyn, “I think if the market goes down on Monday, we’re going to have to go back.”


And so we stayed there for the weekend, and on Monday, the market went down 508 points. My fund went from around $12 billion to around $8 billion. And that gets your attention, you know – (Laughter) Two working days – I said by the end of this week, I will be I’d have no fund.


There wasn’t a lot I could do. I mean here I was on Monday, because the market didn’t open – by 12:00 in Ireland it was still 7:00 in New York. So we did spend that day, and we played around and golfed more, and then we went somewhere instead to watch the market deteriorate.


And I did come back, there was nothing I could do about it. But I think my shareholders, they called up and they said “what’s Lynch doing?” They said, “Well, he’s on the sixth hole. (Laughter) He’s even par now, but he’s in a trap. This could be a triple bogey here. This could be a big inning.”


I don’t think that’s exactly what shareholders wanted to hear, but it’s not like I could do something about this damn thing. So, I came back home and suffered with everybody else. And fortunately, I was consistent. When I ran Magellan, in 13 years the market went down nine times. Every time the market went down, Magellan went down. I was nine for nine.


And because it's very important, here’s another one of these numbers you must write down: If you put $1,000 in a stock, all you can lose is $1,000. I’ve done that several times. And but if you’re right, you make $5,000, $10,000, $20,000.


So in this business, you don’t have to be right one out of two times. You can be right one out of four. A lot of the times you’re right, you know the company’s doing well, you know they’re doing a great job, and you add to it or at least you don’t sell it, which is a tragedy. So you can make more money on the upside. I just roll those out.


And I will now flip a coin to tell you whether the market will go to 4,000 this year or next year. Heads means it goes up, but it’s a two-headed coin. (Laughter) The market will go up in the next year. That’s it. That’s all I ever know about the stock market.


(Source: https://www.c-span.org/video/?60722-1/us-economic-investments)

 

[YAPSS Takeaway]

When market crash there's no point panicking because you can't do anything about it. So relax and it might be an opportunity to buy great companies that you understand at a much cheaper price.