Collection: Peter Lynch - #60 | 10 Most Dangerous Things People Say About Stocks PART 8-9/10



[Transcript]

PETER LYNCH

10 most dangerous things people say about stocks.


[#8] Look at all money I've lost, I didn't buy it.


People do this all the time, they say, I didn't own Blockbuster, I didn't own Home Depot, I didn't own Toy"R"Us. I laid in one of my books listed on two pages in the 13 years I'm in Magellan, I listed I think about 200 stocks A through L on the New York Stock Exchange, they went up tenfold or more that I didn't own when I ran Magellan.


I had on lots of stocks, I listed 200 stocks A through L, I stopped at letter L and I didn't own any shares, they went up tenfold or more, and I was able to do okay with Magellan. And people worry all the time about missing Microsoft, missing Western Digital, missing United Airlines, they spend all their time worried about stocks they missed.


You cannot lose money in a stock you don't own. That's very important. The only way to lose money is buy stocks, have it go down and sell it. That's the only way.


And I swear that people their spouse has to cut out the newspaper in the morning, cut out the C and the person would look at the M; "Oh my god, Microsoft is up three, you know, I was going to buy 1,000 shares of Microsoft, I lost $3,000 Microsoft last night, while I was sleeping, you know."


"I was going to buy 7,000 shares of National Semiconductor at $10, it's now $17, I just lost $49,000 on National Semiconductor." They do this all the time.


[#9] Stock is going up I must be right, stock has gone down I must be wrong.


I'm convinced that people do this all the time, they buy stock at $10, they buy a little bit of it, it goes to $13 that they now say – they don't know anything more about than they knew when they bought at $10, they have no idea what the company does – it's gone to $13 now, they take a second mortgage on a house and buy it at $13.


The best thing could happen for is, it's like a directly from $10 to $4 for these folks, you know. It's going go to $4 eventually, but it goes to $13 in the middle, they're convinced now they bought 100 shares at $10, now they buy 20,000 at $13. And all the fact is the stock went from $10 to $13 is it went up.


The average movement of a stock in the New York Stock Exchange this century between its high and its low, it's been 50% the average stock movement in New York Stock Exchange. That means the stock started at $20, sometimes during the year sold $16, sometimes during the year sold at $24, might have finished the year at $21, might have finished the year at $19.


The average range of a stock in New York Stock Exchange is 50% in 12 months between its high and its low. So stocks go up and down a lot within a year. And say this stock is going up means you're right, doesn't mean a damn thing. So don't buy often and out. That is not a good one.


(Source: https://www.c-span.org/video/?90525-1/investing-stock-market)

 

[YAPSS Takeaway]

  • You cannot lose money in a stock you don't own.

  • The average range of a stock in New York Stock Exchange is 50% in 12 months between its high and its low.