AuthorZeb Pilcher |
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Week 115/16/2021 During week 11 I read chapters 10 and 11 of The Art of Invest Lessons from History's Greatest Teachers by; John Longo. These two chapters covered Peter lynch and his theory of buy what you know and Bonds. Peter Lynch is a very successful investor who wrote the book One Up on Wall Street. Which has sold over a million copies. He stepped down from managing Fidelity Magellan mutual fund after he increased its amount managed from 20 million to 14 billion in 13 years. He had a simple philosophy of buy what you know. For example my dad is a contractor therefore he more than likely knows more about the construction industry than the average wall street investor. So if he knows a lot about that industry and sees an opportunity to make money there he should. Construction prices are extremely high right now and materials are hard to get. He knows this and plans to watch prices and availability of materials so when the availability increases and pricing decreases he can buy those companies that sell those materials on an upward trend and hopefully beat the crowd. Another example is say you are a car manufacturer or work in the food business you should use your knowledge of those industries to invest when you see a chance. This philosophy doesn't limit you to just investing in what you know but it encourages you to use your prior knowledge to your advantage. Chapter 11 was about bonds. Bonds basically is the investor becoming a banker but with more risk. A bond is an investment that you put money into and you earn interest on your investment and hopefully your initial investment back. Like stocks the more you can earn the higher the risk is. Bonds that you issue into the Government or strong companies is relatively safe. Bonds that you issue to smaller companies are more risky especially if the company has a chance of bankruptcy. Bonds are not liquid so its is a lot harder to sell them as soon as you want to. You have to wait until the bond time is up or pull the money out which will have fees and other expenses taken away from it. I personally am going to wait and do more research before I start to even think about investing in bonds. This image represents interest rate that is paid to the investor
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