Peter Lynch 1982 TV Debut - Buy What You Know, Avoid Bottom Fishing

In October 1982, a then camera shy money manager from Boston made his television debut. His mutual fund had the best five-year record in investing and soon he would become a household name, at least in the Lily Tomlin and Don Rickles households. This was Peter Lynch's first major TV appearance, introducing him to the investing public.

Lynch explains that the typical individual investor doesn't have time to spend all day researching like he does, but they have a massive advantage he doesn't. Average investors work in specific industries like polyvinyl chloride, insurance, or textiles, and they're going to see those industries turn months ahead of him. Instead of buying those stocks they know, they buy something from somebody in the National Guard or biogenetics from TV. People in healthcare are seeing new products - they should work on that edge they have in front of them. As they used to tell writers 'write what you know,' Lynch tells investors 'buy what you know.'

Lynch warns about the most common mistake individual investors make: buying stocks simply because they've fallen from price X to 2/3 of X or half of X on that basis alone. This is called bottom fishing in the stock market and it's very difficult - he's had a rough go with it himself. His cautionary example: Standard Oil Ohio fell from 90 to 60 and he told everybody the stock wasn't going to go any lower. Then it went to 50 and he said 'this is it, no lower.' As it went through 40 he said 'this is it.' Finally when it got down under 30 and people asked what he thought of Ohio, he said 'what does Ohio do? I don't know that company' and absolutely backed away from it. The lesson: don't like to buy low just because it's low.