Why people don't follow Peter Lynch's advice

I thought about Peter Lynch last night.

I was driving along a stretch of McKnight Road just a little north of Manchester Road, in Rock Hill. It's an area I go down a lot. A year or so ago, this stretch on the east side of the road was pretty much deserted land. As I recall, a tree nursery of some kind used to be there.

But for some months now somebody has been building a group of fancy apartment buildings. And last night I saw a sign up reading, "Luxury Condos - from the Lower 100,000s."

To me, that's serious housing money, and I laughed at the idea of paying that much for a brand new "luxury" condo that had just recently been put together from scratch on land that not long ago was a tree nursery. Plus, I didn't think much of living right there. It's a short way down the road from an apartment complex with some low-lifes in it. It is close to the very nice Tilles Park. It is close to Ladue, which is the St Louis area's wealthiest area. But these condos are separated from the Ladue mansions by plebian areas of Rock Hill. Plus, they're across the street from where I once saw about 20 raccoons late at night all over the road. Plus, it's not far from a poor area that contains some dishonest criminals, so I'd say it's not really a safe area to walk around at night. It is true, though, that there's currently a large building project at McKnight and Manchester that will add a lot to the shopping available, and it's likely the city planners are going to try to move out the criminal element.

However, it's quite likely that soon people will be buying up and moving into those condos and perhaps living quite happily, glad to have such a cheap luxury condo.

Peter Lynch has long advocated that people buy stock in companies they know well from their own employment or their own shopping. Yet many people don't take his advice -- they'd rather invest in a company that sounds exotic.

Familiarity breeds contempt, and that explains why people would rather lose their money in a high tech company they don't understand than invest in a company close to their lives.

(They really should invest in a portfolio that's diversified, using some of the findings of asset allocation, instead of trying to pick any stocks, but many people want to pick stocks.)

Years ago, I used to sell cable TV door to door. I read somewhere that cable TV companies were a good investment, and the one I was selling for one of the best. Did I invest in cable TV? Are you kidding me? It's a high cash business, with all that implies. Sales people ripped off cash (I had a manager fired for stealing to support his cocaine habit, and he was far from the only cocaine user, and I heard that was a commonly used drug in the company headquarters.) Installers sold the cable boxes to customers. And so on.

Plus, I heard constant complaints about poor customer service and picture outages during bad weather.

Yet, years later, the stock had gone up a lot!



peter lynch
peter lynch