Your Ten Golden Rules Of Investing In Retirement

Here are ten golden rules of investing from Peter Lynch, the retired manager of Fidelity Investments’ Magellan Fund, which soared in value during his tenure and beat the average equity fund every year he was at the helm.

This list will help you and guide you through the investment arena.

1. Don’t he intimidated by the professionals. The media into believing that they don’t stand a chance of beating the market because professionals dominate it has intimidated small investors. The amateur investor actually has a better shot than ever of succeeding today. The professionals act like a mob. They all act the same and think the same, because they all went to the same few schools. How many are very wealthy? Very few. The individual investor has the advantage of being able to think independently of the herd.

2. Look in your own backyard. My favorite source of investment ideas is a mall near my home. ft provides a delightful atmosphere in which to study great stocks. As an investment strategy, hanging out at the mall is far superior to taking a stockbroker’s advice on faith or combing the financial press for the latest tips. Many of the biggest investment gainers of all time come from the places that millions of consumers visit all the time. Your own backyard can often include the business or industry you work in.

3. Don’t buy something you can’t illustrate with a crayon. Buying stock in companies that make things you understand is a sophisticated strategy that many professionals have neglected. It would have kept you from losing a bundle in mysterious biotechnology and memory-module stocks.

4. Make sure you have the stomach for stocks. Market declines are as predictable as snow in Minnesota in January. Over the past 70 years, stocks have had average gains of 11% a year, while Treasury bills, bonds and CDs have returned less than half that amount. But during this same 70 years, there have been 40 scary declines of 10% or more in the stock market. Of these declines, 13 have been drops of 25% or more, which puts them into the "terrifying decline" category. A successful stockpicker must be prepared to ride out these declines and seize them as opportunities to jump in and buy more of a favorite stock when its price goes do~vn along with the rest. If you are susceptible to selling everything in a panic, you should avoid stocks and stock mutual funds altogether.

5. Avoid hot stocks in hot industries. A great industry that's growing fast, such as computers or medical technology, attracts too much attention and too many competitors. When an industry gets too popular, nobody makes money there anymore. But great companies in cold, nongrowth industries are consistent winners. In a lousy industry, the weak drop out and the survivors get a bigger share of the market. A company that can capture an ever-increasing share of a stagnant market is a lot better off than one that has to struggle to protect a dwindling share of an exciting market.

6. Owning stocks is like having children. Don’t get involved with more than you can handle. The individual investor probably has enough time to follow eight to 12 companies. Your portfolio doesn’t need to contain more than five companies at any one time. If you can’t find any companies that are attractive, put your money in the bank until you discover some.

7. Don't even try to predict the future. Nobody can predict interest rates, the future of the economy or the direction of the stock market, so dismiss all the forecasts. Instead, concentrate on what's actually happening to the companies in which you're invested. Their individual performance is what's important- not the performance of the economy or the market or any of the indexes.

8. Avoid weekend worrying. The weekends are prime time for dwelling on bad news and the consequences this news may have on stocks. Catching up on the news can he dangerous. It's no accident that Mondays historically are the biggest down days in stocks, and that Decembers (when tax-loss selling is combined with extended holidays during which people have extra time to consider the fate of the world) are the biggest down months. The key to making money in stocks is not to get scared out of them.

9. Never invest in a company without first understanding its finances. The biggest losses in stocks come from companies with poor balance sheets.

10. Don't expect too much too soon. My greatest stocks have turned in their best performances in the second, third and fourth years I've owned them, not the first week.. .the first month.., or the first year. The stock market is totally random over one or two years. If your horizon is that short and you need the money you're investing for something fairly immediate, like sending your kid to college next year, investing in the stock market is a bad idea. You should he in a money-market fund instead. But over five, ten or 20 years, the stock market will deliver fairly good results. Remember that time is on your side. If you had waited ten years after Wal-Mart went public, you could still have bought its shares for 90 cents.