Saturday, August 04, 2007

Peter Lynch On Selling Stocks too early

One of the problems with emotions getting in the way is that one feels the

need to be "doing something", and that is a difficult temptation to keep in
Even Peter Lynch succumbed to it: in the first year he managed the
Magellan fund, his stock turnover was 300%. But he noticed quickly that he
was selling winners much too soon, and managed to get the turnover down to
100% in the second year. And that's another emotional thing: one tends to
hang on to one's losers too long, and sell winners too soon. Lynch calls it
"pulling up the flowers and watering the weeds."

When I get the temptation to "do something", I sublimate it by getting to
know better the companies that I own.

I try to keep in my mind something that Bejamin Graham said, which helps me
keep my emotions in check and to think independently:

"The fact that other people agree or disagree with you makes you neither
right nor wrong. You will be right if your facts and reasoning are correct."

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