10 deadly mistakes to avoid in stock markets: Lessons from Peter Lynch to John Templeton

By: | Updated: September 30, 2017 12:15 PM

We bring to you 10 valuable lessons on deadly mistakes to avoid for being successful in stock markets, shared by great investors including Warren Buffett, Paul Samuelson, Benjamin Franklin and many more, who have created wealth through sheer discipline and patient investing.

Warren Buffett (Image: Wikimedia Commons)

Stock markets have a way of disciplining the traders and investors, that by suddenly moving against the expected lines, and in turn erasing the gains of so-called experts who are deft at timing the market. However, every once in a while, a great investor comes along the way and grows wealth over and over again, not by trying to change the game, but by sheer discipline in playing this game by the well-laid out rules. Today, we bring to you 10 valuable lessons from some of such stock market greats, who have created wealth for themselves and their stakeholders through sheer discipline and patient investing.

“Rule no. 1: Never lose money; Rule no. 2: Never forget Rule no. 1.” – Warren Buffett, Chairman, Berkshire Hathaway

With this, the ace investor Warren Buffett wants to convey that your investment decisions should be made considering money as the key objective. Invest until your wealth is growing, calibrate your portfolio before your return goes into red. This is one of the very famous anecdotes of Mr Warren Buffett.

“An investment in knowledge pays the best interest.” – Benjamin Franklin, renowned US Author

Benjamin Franklin wants to articulate that an investment in knowledge is the best possible wealth decision. Having adequate knowledge and skills will always help in your advancement, in situations when money fails to make it up.

“In investing, what is comfortable is rarely profitable” – Robert Arnott, Chairman and CEO, Research Affiliates 

As far as growth of wealth is concerned the famous US investor and entrepreneur Robert Arnott says that an investment opportunity which doesn’t incorporate periodic modifications is rarely profitable.

Also read: Three golden rules for making money in the stock market, by Angel Broking

“I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” – Warren Buffett

The investment maestro Warren Buffett is keen to let out the money making secret: just go the opposite way the crowd is moving, as you can make out much from it when a proportionately higher audience is betting the either way.

“The individual investor should act consistently as an investor and not as a speculator.” – Ben Graham, Author (Intelligent Investor)

The famous US economist and educator Benjamin Graham, followed by the who’s of who in the investment management business such as Warren Buffett, says that all the market participants who are there for long-term growth should set their direction only as an investor, and not as a short-term gainer.

Peter Lynch. (Image: Wikimedia Commons)

“Know what you own, and know why you own it.” – Peter Lynch, former manager, Fidelity Magellan Fund

Another famous investor and philanthropist Peter Lynch focus on very key fundamentals. Investors should ask themselves that what they need to invest in and why a specific asset class before making a decision.

“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” – Paul Samuelson, Nobel laureate economist

Paul Samuelson, the noted US economist, says that investment is more like watching your growing crop or a painted wall to dry. Almost all of the asset classes require adequate time to mature with set fundamentals. He advises investors to give time to their investments to grow. As for people looking for short-term excitement in the stock markets, Paul Samuelson compares it with gambling.

“If you are not willing to own a stock for 10 years, do not even think about owning it for 10 minutes.” – Warren Buffett

This is another most circulated and well-received quote by the one of the richest man on earth Warren Buffett. With this he wants to make clear that always look to invest in stocks with an objective to stay invested for at least 10 years, otherwise resist yourself from stocks.

“The stock market is filled with individuals who know the price of everything, but the value of nothing.” – Philip Arthur Fisher, Investor

The famous US stock market investor Philip Arthur Fisher, who authored ‘Common Stocks and Uncommon Profits’, points out to the fact there are a lot of unskilled dealers in the market who keep the price of everything on their fingertips but don’t have the ability to gauge the real value of the underlying asset.

“The four most dangerous words in investing are: ‘this time it’s different.” – Sir John Templeton, Founder, Templeton Growth Fund

The famous US-based investor and philanthropist Sir John Templeton highlight one of the biggest risks in the stock markets, and that has nothing to do with the technical or fundamental weakness of the market, but the human weakness of undermining a credible threat by shrugging it off. The history of the stock market is filled with the periods of rapid rise followed by even sharper fall. However, the tendency of most investors is to quickly forget the trend and believe so much in the rally that they turn blind to the underlying threat.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition