A:

On February 15, 1989, Peter Lynch's investing book, "One Up On Wall Street", made its debut. At the core of the book was a call to arms for individual investors. Lynch believed that individual investors could outperform highly educated Wall Street stock pickers by keeping their eyes open during their daily life and learning basic research skills. Lynch pointed out that, as consumers, workers, mothers and fathers, individual investors are much closer to the market than the people in Wall Street's ivory towers. When new products are introduced or new businesses opened up, consumers get first-hand information that Wall Street firms wait months for analysts to come up with.

Lynch explained that once a stock becomes noticeable enough to make the institutional approved list, most of the gains have already happened. He coined the term tenbagger to describe a stock that returns ten times the money that you put into it and gave numerous examples of ten, twenty, and even fortybaggers that individual investors could've spotted before Wall Street jumped in. These include everything from Dunkin' Donuts, Wal-Mart, The Limited and Stop & Shop. Lynch showed that Wall Street funds came in late on the majority of multi-baggers, seeing only a small percentage of the overall gains.

Boiled down to two precepts, "One Up On Wall Street" tells investors to invest where they have an edge in knowledge and keep up with the "story" of their stocks. Lynch didn't want investors to blindly buy companies that they encountered in their daily lives, but he suggested that those companies were the best place to start looking for great stocks rather than searching in an industry that they knew nothing about. He also emphasized the need to create a storyline for a company and keep up with any changes in that story so that investors can eliminate the market noise before deciding to buy or sell. The mixture of real world examples and practical advice made Lynch's book a classic and it continues to be a source of inspiration and instruction for individual investors today.

For more, read Pick Stocks Like Peter Lynch.

This question was answered by Andrew Beattie.

RELATED FAQS
  1. What are the biggest risks associated with covered interest arbitrage?

    Covered interest arbitrage is when an investor buys into foreign currency that has an interest rate that will yield the investor ... Read Full Answer >>
  2. How did Enron use off-balance-sheet items to hide huge debts and toxic assets?

    Prior to its infamous accounting scandals and collapse, Enron used off-balance-sheet special purpose vehicles (SPVs) to hide ... Read Full Answer >>
  3. Where did the term 'Nostro' account come from?

    The term "nostro" is Italian in origin. It means "our" or "ours." In accounting and finance, nostro accounts are often differentiated ... Read Full Answer >>
  4. Can the Herfindahl-Hirschman Index be used to determine competitive balance in professional ...

    Although the measurement and analysis of a company's key performance indicators (KPIs) vary by company, it is important to ... Read Full Answer >>
  5. Why are the tangible assets of a company important to investors?

    A financial forecast is an estimation or projection of likely future income or revenue and expenses, while a financial plan ... Read Full Answer >>
  6. How does price elasticity affect my stock purchase decisions?

    The person who handles a corporation's short-term investments varies depending on the size of the company, the corporate ... Read Full Answer >>
Related Articles
  1. Economics

    The History of Stock Exchanges

    Stock exchanges began with countries who sailed east in the 1600s, braving pirates and bad weather to find goods they could trade back home.
  2. Economics

    How Warren Buffett Made Berkshire A Winner

    Berkshire Fine Spinning Associated and Hathaway Manufacturing Company merged in 1955 to form Berkshire Hathaway.
  3. Investing News

    Building a Case for the Bulls: 3 Opinions

    These three big names are bullish on the economy. Are there good times ahead?
  4. Mutual Funds & ETFs

    Mutual Fund Fact Sheets: What You Need to Know

    Novice or experienced investors should read mutual fund sheets. Fees and explanations will be discussed providing valuable information to the investor.
  5. Investing News

    Feeling Bearish? If So, You're in Good Company

    These investing practitioners and pundits earned notoriety for their accuracy; they're sending a dire warning about the global economy.
  6. Investing News

    The 5 Biggest Asset Managers at the End of 2015 (BLK)

    Learn about the worldwide asset managers that prospered in 2015 despite a year of very poor performance in stocks, bonds and commodities.
  7. Stock Analysis

    How BlackRock Became a Mammoth Asset Manager

    The rise and continued growth of BlackRock, the world's largest investment firm.
  8. Financial Advisor Technology

    5 Robo-Advisor Predictions for 2016

    One of the fastest-growing sectors within the financial services industry, robo-advising will see many changes this year. Here's what we're likely to see.
  9. Wealth Management

    Warren Buffett’s Frugal, So Why Aren’t You?

    Aside from his renowned investing prowess, Buffett is legendarily frugal.
  10. Retirement

    Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.
RELATED TERMS
  1. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
  2. Steve Cohen

    A trading magnate also referred to as the Hedge Fund King and ...
  3. David Tepper

    A legendary investor who specializes in distressed debt and manages ...
  4. David Einhorn

    Known for his short selling strategy, activist investor David ...
  5. Lean Enterprise

    A production and management philosophy that considers any part ...
  6. Nelson Peltz

    One of the most successful activist investors in the financial ...
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center