 Good day, fellow investors. One of the best investing books out there. And it is the best because it was written by one of the best investors out there ever is one up on Wall Street by Peter Lynch. And the first 90 pages of the book are dedicated to stock market beginners and how to prepare for investing. So the best investor ever is giving us tips on how to start investing and how to invest. And this is summarized in this video. Peter Lynch was Fidelity Magellan's head investment manager for 14 years from 1977 to 1990, where he turned 1,000 into $28,000 over 14 years for a yearly investment return of 29.2%, 1,000 into $28,000. And he's telling us how to do that too. But perhaps even more importantly, his wife invested $750 a year into her IRA account from 1974 to 1978. Thus in total, just $4,500 invested, he managed that money and he turned that money into more than 10 million. Now the account has 8 million, starting with just 4,500 and 3 million has been taken out for weddings and other things. So that's Peter Lynch, over 40 years, 20%, and you can turn a few thousands into tens of millions. If you want to learn how, if you want to have a similar pet when it comes to investing over your investing life cycle, stick to this video. Also, click like, subscribe to this channel and click that notification bell so that you get notified when there is a video out that's very important for you. Let's start with the content. So I've tried to summarize all of this and answer the most important questions that the stock market beginner might have. What is a stock? What's a price earnings ratio? How does the stock market work? How to start investing? Am I the right person to even invest? Is the stock market a gambling place? Is it worth to invest small sums, just $1,000? And we have seen how it is worth because you can turn a thousand into tens of thousands and millions if you just follow the right steps. And we're going to discuss those right steps. Extremely important steps, extremely important steps to understand because 99% of people on the market are not following these steps. They are gambling, you have to be an investor and that's what makes all the difference. When it comes to investing, you're investing in stocks. But what is a stock? Many say the stock market is for gamblers but a stock is just a piece of paper, electronic paper today that represent ownership in a business. So you are part owner of a business. So if you are a part owner of Walmart, Nike, CarJill and other big businesses, are those owners gamblers or are they investors? Sam Walton, the founder of Walmart was an investor, Nike, investment, CarJill and all those big businesses, people don't go around telling Jeff Bezos or Bill Gates, they are gamblers. No, those are investors. Those are mostly business owners. And that's the core concept also of Peter Lynch's. You have to be a business owner. Forget about the stock market. The stock market is just something that is a vehicle that gives you business ownership. And if you can get that, then your investment path to millions is pretty well set. Further on the gambling topic, yes, stocks are volatile. The prices go up and down because 99% of people on the stock market are gamblers. You have to be an investor and take advantage of the gamblers and don't be taken advantage of because yes, stocks are volatile and if you look at this chart, the white line that represents $1 invested in stocks in 1802, that turned into more than one million. Yes, $1 into one million. The chart, the line, the white line is very volatile but this doesn't mean that stocks are risky over the long term. Stock prices go up and down, yes, but if you invest in businesses, businesses grow, businesses deliver earnings dividends so it's not really risky. You are just a business owner. It's risky to hold cash, to hold bonds because if you hold cash, $1 from 1802 is now just four points, something cents. So it lost 95% of the value due to inflation. That's for me risky. Owning businesses is not risky because it's one of the best investments out there alongside owning real estate. To dig deeper into this subject, we are going to compare earnings and stock prices and for that we're going to use a price earnings ratio because if you invest in businesses, you're focused on the earnings, not on the stock price. Stock market investors today are focused on the stock price and you can see that by watching Apple's stock price. It was below 100 just three years ago, then it went up to 220, then it crashed to 150 and now it's up to 280 and most investors, except for Buffett, look at those stock prices and think, okay, where will Apple's stock go up next? As an investor, you don't care where the stock will go next. You care where the earnings will go next. And one important metric that helps when it comes to investing is the price earnings ratio. The price earnings ratio is the ratio of the stock price versus the earnings. The earnings is what delivers your stock market returns. In this case, Apple's earnings have gone up from $10, 9.74 to the current $11.89 per share. However, the stock price went from 100 to 280, which means that the price earnings ratio went from around 10 where investors were expecting earnings yield of 10% to 24 that now investors are happy with an earnings yield of just 4% from Apple. This means they are gambling or things change, but what you have to focus on and what makes investing easy is the earnings of the business and how those develop, not the stock price. So the price earnings ratio tells you what are the earnings in relation to the stock price. You simply divide the price by the earnings per share and you get the price earnings ratio. The price earnings ratio is very useful to get to the earnings yield of a business. And the earnings yield is extremely important because the earnings are highly correlated with stock market returns. If earnings grow, so stocks grow. And if we look at the long-term chart of the SAP 500, you can see that, yes, it is volatile, it goes up and down, but over the long term, the SAP 500 follows SAP 500 earnings. SAP 500 earnings per share have grown over time and so have the SAP 500 indexes. So that's the core focus that Lynch is promoting in his book and that makes investing easy and makes investing not gambling. You just have to see what is the earnings yield you want to get, what is the earnings return you are happy with. And for that, you use the earnings yield. If you want to get the earnings yield from the price earnings ratio, you simply divide 100 with the price earnings ratio, make it a percentage and you have the earnings yield. You have the business owner yield that you get when you invest in a company. So if Apple's price earnings ratio is 24, 100 divided by 24 is 4.2%. So if I buy a stock of Apple now, and I assume just for now, just for this example, earnings don't change in the future, my return from that investment from a business perspective will be 4.24%. If you are happy with such a return from a good company like Apple, then Apple for you is a buy. If you are not happy with such a return, you want 10% from good companies, then Apple was a buy just a few years ago when the price earnings ratio was around 10 and the earnings yield was closer to 10%. What changed in the meantime? Well, investors, stock market traders are gamblers and now they think they can make a few bucks by pushing the price higher in relation to the negativity that was surrounding the stock a few years ago. So that's something you take advantage of. When you're happy with a 10% yield, you buy when you are not happy, let's say 4%, you might sell. So as an investor, you take advantage. If you buy Apple now, hoping that it will go to 300, 350 in the next year or two, then you are a trader, a gambler, a speculator and then you'll get the returns you deserve. Further, when it comes to investing in businesses, Nike, Walmart, Cargill, all the businesses that we mentioned were pretty much smaller 20, 30 years ago because businesses constantly grow. The world grows, the economy grows, the American economy is constantly growing and things as we are humanity, we are positive and we grow, we solve the problems. The 2009 crisis has been solved. New crises will come and will be solved and the world will continue to be a better place. So earnings and businesses will grow, which is an extremely strong tailwind when it comes to investing. No other investment gives you growth. A new house doesn't produce another house, but Starbucks is constantly opening new franchises around the world, which means that the business is constantly growing, constantly increasing those earnings and that's a huge tailwind when it comes to investing. I recently made a video about how to estimate growth stocks, how to analyze them, so you can check that, I'll put that in a link in the description below with other very interesting videos that can help stock market beginners. So check those videos later, but first we have earnings, we have growth and that is what delivers investment returns. So the key is that you find businesses that you are happy owning from an earnings perspective, from a growth perspective, from a business perspective. That's all that Peter Lynch is preaching, has been doing and that's has delivered the amazing returns he has made when he turned 1,000 into more than a few millions. So extremely important, if you want to invest in stocks, you invest in businesses, you buy businesses, you don't buy stocks, you don't gamble with stocks. That's the most important thing. If you want to be a long-term successful investor, that's it. However, the stock market stocks, they give you so much data, stocks go up and down on a daily hourly basis. If you check your stock price next hour, it will be already different. So it's very important to understand how the stock market works, how you have to play it and then always focus on the long-term trend, earnings, growth, positive tailwinds and you will see that the odds of investing in the stock market are in your favor because you simply let the businesses do what they do best, which is grow and deliver earnings. I have made here a small table where Peter Lynch says that if you invest in 10 companies and you're just right on six out of 10, you are an investing genius. If you get it right four out of 10 times, you will still do great and let me explain. Let's say I invest 10,000 into 10 stocks equally, 100,000 investment. Over 10 years, two of my stocks go bankrupt, four do nothing. So I invest 10,000 after 10 years, it's still 10,000. So I missed on six out of 10 investments already. However, stock number seven doubles, stock number eight triples, stock number nine quadruples, which is very likely on 10 stocks. And let's say the stock 10 becomes a 10 bagger, which means that it increases 10 times in Lynch, Lingo. The total result of this portfolio is 240,000 over 10 years. So being right on four out of 10 will still give you a great return of 8.6%. If you get five, if you get six, if you get seven out of 10, then you turn thousands into millions, which is something amazing. But even four out of 10 gives you a great, great return. Now many fear that volatility, many fear stock market crashes and stock market crashes can happen anytime. And if you look at this chart, those are huge declines. Less two stock market crashes were close to 50%. And if you invest now 100,000 and in a few years you see it at 50,000, that simply hurts because we are wired to focus on the stock price. But you are investing in businesses and actually stock price crashes give you an opportunity to buy more on the cheap and improve your long-term returns. If you just look at this stock market crashes, okay, 2000, it took what 13 years to recover to the previous level. You see the long time that stocks were down. But let's look at the 60s. There were many crashes, but it took just a year to recover and pass the previous level. In the 70s, it was a longer period. And okay, in 1922, there was really a long period. It took stocks 25 years to recover. But those who invested in good businesses back then still did very, very good. The Dow Jones is up 30 times over the last 40, 35 years, despite two huge crashes in 2000 and in 2009. So there are positive tailwinds when it comes to stocks. As we said, businesses grow. So despite the crashes, if you invest in businesses, you'll do extremely well. If we dig deeper into this subject, those that invested through the Great Depression, the worst depression ever, the worst stock market crash ever, where stocks fell 85%, let's say you invested in 1925. The dividend yield on the businesses was above 5%. The dividend yield was 15% in 1932. So if you reinvested that money and held good businesses, not crazy speculative businesses, then you would have had been extremely happy already by 1935 because you would have tripled, probably double tripled your money because you took advantage of the crash and you held good businesses that deliver returns. That's all when it comes to investing. If you held from 1930s onwards over the next 40, 40 years, 10 times up, plus the dividends above 5%, 6%. So stock market is not a gamble if you are not a gambler. The 15% dividend yield reinvested in just 1931 would be up 25 times plus dividend growth, et cetera, et cetera. So positive odds, positive tailwinds, it's always great to be an investor in businesses and over the long term you'll do extremely well. So we have said you have to be a business owner and focus on earnings. But in order to focus on earnings and be a business owner, you have to have peace of mind and really separating your stock market investing for the long term with your current personal life. And that's something Peter Lynch emphasizes because if your personal lifestyle is connected with the stock market, then it's very difficult to make rational, great decision decisions, especially where everybody else is panicking. One of the ways to be smart about investing in the stock market is to own your own house because a house like stocks has great tailwinds, tax benefits, you can get a mortgage so somebody else can pay for your house because usually what you're paying rent is similar to what you pay in the mortgage. You can get a fixed mortgage, rents will constantly go up, your fixed mortgage will be fixed. 99% of cases, house prices will go up over the next decades, which means it will be a great investment for you and again, it will give you peace of mind in the long term. So Peter Lynch advises to first own a house or have the money ready, have the money separated so that you can buy a house, you can build the foundation of your financial life and then let the stock market volatility not bother your investments. The second message consequently is that, and this is so important, you have to invest only the money you don't need in the next 10 years. The money that you have that will not, whatever happens with it will not affect your lifestyle because if it affects your lifestyle, if you need it for retirement, if you need it to pay for the down payment of the house, if you need it for college tuition or whatever, then when the stock market starts tanking and your stocks go down, instead of buying more, you will be in panic to lose what you need and therefore you'll sell at the wrong time. This is what happens always. People need the money, people gamble and then it affects their lifestyle and then they sell at the wrong time instead of buying. This is so typical. Therefore, what is invested in the stock market is long term, when it becomes a few millions, then you can sell it, then you can enjoy it, but until then, keep it there and keep it separated from your personal lifestyle. Even if it's just a few thousand, a few thousand can turn into millions but don't put too much money into it because then you'll make the wrong decisions. So keep a separate stock market account that will not affect your life but will allow you to enjoy the tailwinds of business stock market investing. Further, do you have what it takes? It's a mindset question and Lynch considers it one of the most important questions when it comes to investing. When the book Peter Lynch wrote was published, this was New York bestseller but then another book, The Great Depression of 1990 was also a bestseller. That book went into oblivion forgotten but it did sell a lot of copies in 1990. So imagine those who have listened to those great depression projections and did not invest in the stock market over the last 40 years. They would have missed on great returns, on great investments, on great businesses because they were panicking, they were afraid. If you are an investor, then you are positive about the economy, about the American economy, about the global economy, about humanity in general because over the last 200 years, 100 years, even with two world wars, living standards has constantly improved. So whatever happens, we are humans, we'll deal with it and the tailwind for investments are positive. And that's something you have to keep in mind and you have to do the opposite what others do. The typical behavior concepts are the following. Concern, when prices fall, you should be the opposite of concerned. You should be ecstatic because you can buy what you already have, you can buy the good for less money. So it's like sales in a shop, everybody loves them, nobody loves sales on a stock market, but it should be like that. Then when stock prices constantly go up, up and up complacency comes in and nobody even thinks about what can go wrong and forgets to think about fundamentals which are the core of investing. Few think about fundamentals now that stocks seem to can only go up. However, then when time comes, if you invested too much money or your lifestyle will be affected, then people panic and many sold in 2018 because they panic that there will be a bigger crash and therefore missed out on the 28.5% year to date gain. Lynch introduces a great topic which is penultimate preparedness. We are wired to always prepare for what has happened. So the last two crashes were 50% and a lot of economists, investors prepare for the next crash of 50% and over the last seven, eight years I've been just listening to people, oh, I'm waiting for the next 50% crash. They started when waiting when the S&P 500 was at 1,000 points. Now the S&P is above 3,000 points and they are still waiting for that new 50% crash that might never come. You never know. But if you invest in fundamentals in businesses, you don't care about stock market crashes. And then keep in mind another thing, Lynch turned 1,000 into 3.5 million. So a small sum into 3.5 million. Let's say that you invest 10,000 now over the next 10 years and the 10,000 become 500,000, 400, 300,000 over the next 20 years. That's still amazing. So even if the market is flat, if you invest in earnings, you will turn those 10,000, 20,000, you invest 100,000 thanks to compounding, thanks to growth in businesses, thanks to owning great businesses, you will turn them into a great sum over the long term if you are an investor. So I hope this answers the question also whether this is a good time to start investing. If you look at the stock market, yes, there is a lot of risk, valuations are high, but then it's up to you to look for businesses that you can understand. Here, Peter Lynch discusses how we have an advantage as amateurs because we see what's going on around us. And the second part of the book, so subscribe and click that notification bell, is about how to pick and how to find those great stocks. Now, Peter Lynch in the last interview said that we have to look globally for great investments and if you look, you will find, if you learn, if you teach yourself how to learn for great investments, great businesses, you will start finding them. And that's the topic on the second part of this book that we'll discuss in another video. So it's all about mindset, it's not about the market, it's about what you are buying and what you are looking for. And if you're looking for great businesses, you can find them even today. Then you never know what kind of crashes are ahead. So by not buying a good business because you are afraid of a crash, you might miss on huge returns. And that's exactly what happens to investors. You have to do the opposite from the herd. Investors are always afraid, they panic, they do the wrong thing at the wrong time. Even if we listen to Buffett or Benjamin Graham, the biggest enemy of investors is the investor himself. So you have to be in peace with what's going on in the market, understand what's happening in the market and simply invest in businesses. Over the last 20 years, the average investor reached a return of just 2%, the SAP 500 did 5.6%. So the SAP 500 destroyed the average investor because the average investor is buying high and selling low. And that's something you will not do if you focus on businesses. If you own businesses and forget about stock prices. Stock prices have to just be a reference to what are you paying for a business when you buy. And then if it really becomes exuberant and the business is not developing as you planned, then you might consider selling and exchanging for something else. But in the meantime, don't focus about stock market, price volatility, just focus on the business and get to know those businesses. Another great question is do you need financial education to start investing, to invest in the stock market? Peter Lynch was a liberal arts major. So he studied philosophy, history, the ancient Romans and things like that. And I have a PhD, but to tell you to be honest, it didn't help me at all when it comes to my stock market investing returns. It helped me get a great job, but not when it comes to investing returns. There are simple principles that you have to follow to be an investor that will cover. So subscribe and also check the links in the description below for more videos. So that is something that you have to understand that investing is pretty simple. And even Buffett says that if you see formulas, investing formulas or investing investment propositions with Greek letters in them run away, investment is pretty, pretty simple. It's about buying great businesses at a fair price, price earnings ratio with good stable growth in front of them, that's it. Another tip following this one is don't listen to professionals. Professionals live in a completely different world. If you don't beat the market as a professional, in one year you lose your job. So you have to cater for that stock market volatility. Then you have to buy from pre-approved lists. You cannot buy whatever you want. Let's say you buy Google, it goes down, or Apple, or Facebook, it goes down. Your client will call you, what happened to Google, Facebook, Microsoft? And you say this, this. Let's say you buy some obscure company in Australia, in China, in Argentina. Your client will call you, you're fired. Why did you buy this and this? You're crazy. So that's how the market works. Plus Buffett cannot buy companies that are smaller than 10 billion. It doesn't move the needle for him. So don't listen to professionals because you never know what's behind their motivation. And therefore Lynch suggests just to be an amateur independent thinker. Where do you find those 10 beggars like Starbucks? Well, those that went to Starbucks 10, 20 years ago could have just looked around and said, okay, this is a good business. High return on capital and delivering earnings and growth. So, okay, I might check whether there is a stock. And that's the message from Peter Lynch. And to summarize his points, investing companies, not stocks, ignore the market, ignore the economy. You can't predict that all you can predict and focus on are the business earnings that the company can deliver. The long-term returns will be in line with those business owners. Don't listen to professionals. Check your mindset, whether you can be an investor or you're just a speculator. If you speculate, unfortunately, you will lose money. If you use the money that can affect your lifestyle, you will see you will lose money because that's how the stock market works. You can decide whether you want to have the favorable odds of the stock market, the earnings growth, the tailwinds, the long-term investment or you want to go against the stock market, gamble on stock market price fluctuations which will cost you very, very much. Thanks for watching. I'm looking forward to your questions, comments, anything you might want to ask, anything to clarify, put it there. We'll make new videos that will help you invest and hopefully turn that few thousands you have into millions over the long-term. This is the mission of this channel. So thank you for watching and I'll be seeing you in the next video.