Learn to Earn: A Beginners Guide to the Basics of Investing and Business

To Peter Lynch, success in the stock market is pretty basic: if a companys earnings rise, then the stock price goes up. “This simple point–that the price of a stock is directly related to a companys earning power–is often overlooked, even by sophisticated investors,” the former Fidelity Magellan manager writes in Learn to Earn, his third book on investing. “This is the starting point for the successful stock picker: find companies that grow their earnings over many years to come.”
One of the best managers in the history of mutual funds, Lynch is certainly the person to help people choose the right stocks and understand the market. More so than One Up on Wall Street or Beating the Street, this Lynch book is for beginning investors of all ages. Lynch and coauthor John Rothchild are family men who are worried that teenagers arent learning enough about the importance of American companies in improving lives and creating wealth. Lynch questions why students are taught that Hamlet was a tragic hero and Napoleon was a great general, but they dont know that Sam Walton founded Wal-Mart. In fact, Lynchs grasp of the past is one of the strengths of the book. One of the best chapters is “A Short History of Capitalism,” a witty and homespun look at characters like Karl Marx, the Communist who believed capitalism was doomed, and the robber barons, the shrewd railroad magnates of the late 19th century who amassed huge fortunes by manipulating the markets.
Unlike the robber barons, beginning investors, Lynch says, should stick to the basics: get in the habit of saving and investing and putting aside a certain amount every month; develop a strong stomach because the stock market is going to fall and theres no way to anticipate it; do a little homework so you can understand the reasons to own a particular stock; and buy shares in solid companies and dont let go of them without a good reason.
This book marks Lynchs coming out as a fan of “direct investment programs,” which are offered by many good companies. You purchase a couple of shares or so directly from the company and then you enroll in a plan and buy more shares each month, in some cases without paying a penny in fees and always without a broker–the way Lynch likes it. Lynch loves these plans because theyre a great vehicle for investing a little bit at a time over a long period. Grab onto a company and learn about it, Lynch writes. The more you learn, the more youll earn. –Dan Ring