facebookAccording to Lynch, “If you can't explain to a 10-year-old in two minutes or less why you own a stock, you shouldn't own it”. What are your thoughts on this phrase? Do you agree? Sounds a bit sweeping? - Seedly
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Anonymous

Posted on 05 Nov 2020

According to Lynch, “If you can't explain to a 10-year-old in two minutes or less why you own a stock, you shouldn't own it”. What are your thoughts on this phrase? Do you agree? Sounds a bit sweeping?

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3 answers

Discussion (3)

Max Soo

Max Soo

Level 9. Genius

Updated on 06 Nov 2020

Sweeping sure, but don't have to take it too literally. What it just means is that you'll have to have conviction and a very good understanding of the company before owning them. If you can't explain to others why you're owning the stock in the first place, or have reasons like "It's low, so I think can rise." etc etc, then you're probably better off not buying it.

As someone once said, "It's the mark of a charlatan to try and explain simple things in complicated ways and the mark of a genius to explain complicated things in simple ways."​​​

1

Question Poster

09 Nov 2020

This is so helpful 👍 Thanks for sharing Max!

Post

Jovan Lai

Jovan Lai

Level 13. Grandmaster

Posted on 05 Nov 2020

It is one of my favourite quotes and principles I live by. The message in point is the same as Warren Buffett’s point on circle of competence.

Basically they are telling you to invest because you have done your research and is something you can understand, truly believe in and have affinity towards.

They say this because majority of people follow the herd. People buy what others are buying and sell because others are selling. In the past it used to be tulips, oil, dot.com, housing bubbles etc...

Look around at see what are the things people are unanimously extremely bullish about or the style of how everyone is investing. Only do it if you understand and truly believe in it.

1

Question Poster

09 Nov 2020

Thanks for sharing Jovan! This is so helpful 👍

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CH

CH

Level 13. Grandmaster

Posted on 05 Nov 2020

Is a general statement, but i believe a deeper meaning is to please understand what you are doing an...

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