The Growth Investor & Final Thoughts
Another form of speculator who probably doesn’t see himself as such in the “Growth Investor”. One of the most famous of this type is Peter Lynch of Fidelity Magellan fame. He’s one of the greatest speculators in the world. We classify him as a speculator instead of as an investor because he would often by overpriced companies under the belief that their phenomenal growth would propel the stock prices higher to the point where either 1) the current price would seem like a tremendous value in the future and thus go higher, or more usually 2) the price would rocket higher in the short term and he would be able to sell it for more than he bought it for and move on to the next stock.
We feel you’re nuts to try this, but there are people good at it. Another way to look at it though is that they were good at it during the greatest bull market in the history of the world. It’s a lot easier to be good when everything is going up!
A Final Word on Philosophy
We’ve talked about several styles of money management in this series. It’s important to focus on the style that works best for you and improve your skills be practice and continual learning. For this reason, it’s probably best to focus on one style. It’s extremely difficult to master multiple styles. That being said, it might make sense to do a couple different things in some circumstances. There’s no reason to pigeon hole yourself if there are multiple things that work for you. We mentioned an example above.
One might be primarily a Micro Economic Thinker, but still have one or two types of Trades that he likes to do when the set up is right. At the same time, you might subscribe to stock picking services who do a lot of analysis for you that helps you pick the occasional stock within a sector which you like within your macroeconomic view. This is an example of a person having an overall philosophy while still utilizing the advantages of other methods. This works so long as you truly understand what you are doing in every area.