Analysis of “Beating the Street” & “Rich Dad, Poor Dad”
To every sane individual, the family is the most import part of their life. Unfortunately, many professionals are often too engrossed in growing own careers but at the expense of own families. In the books preface, Lynch acknowledges that he did not spend as much quality time as is desirable but is working on it after retirement (12). He uses the analogy of seventh grade students to underscore that anyone can make it big in financial investments but the key is keeping it simple, invest in companies that one is able to understand how they work (Lynch 25). In the second chapter, the book cautions readers against listening to keenly on market analysts who are always pessimistic. He acknowledges that, “Even after good news is made public, Wall Street can be slow to react”. (Lynch, 252)Financial markets suffer crashes when stocks are valued to high but by understanding the dynamics of a specific set of firms can present the perfect opportunity for an investor to buy even when it appears as the best moment to sell.
There are some financial investment options that seem popular with many American investors. Lynch cautions against following such trails by pointing out that bond funds do not offer as much returns as some readily available direct investment tools such as bonds (46-47). He points out that, “The reason that stocks do better than bonds is not hard to fathom” (Lynch 42). These ensure a definite ROI and do not require one to research or manage to profit from them. There are many mutual funds in operations all across the U.S. however, many of them are duds. Lynch points out that getting a good mutual fund demands as much research as that which is necessary to ascertain a good stock option (51). However, finding a good firm is not always hard as admirable management operations are thrifty and are careful not to use resources in conducting glamorous campaigns. This implies that while bonds are better than bond funds, a knowledgeable investor will opt for stocks as opposed to bonds.
Big firms were once small companies. Lynch advises readers to focus more on understanding the opportunities presented to small companies in future as they avail massive avenues for high returns as opposed to large firms with very limited chances for expansion (70). It is common for investors to lose money in stocks. The key to good gains is to study fundamentals when the situation seems to deteriorate, it is ill advised to hold or otherwise buy its shares while performance is on the decline. Lynch points out why he preferred investing in cyclical organizations (70). These are entities whose performance is closed dependent on the manner a nation’s economy performs. When there are good times, they perform exceptionally well but in times of recession, their profit margins are hit hard. Investing in such firms in times of economic uncertainty often result in Lynch making huge earnings from investing in them.
Utility firms which are not doing so well as also a great investment opportunity for the individual investor. Even in tumultuous times such firms are often bailed out by governments and their importance to an economy implies that at some time, it is often to rise up again ensuring huge returns for once low buys (Lynch 90). There are times when publicly owned firms are privatized. The initial stock offering is nearly always presented at below book value making them very worthy buys. New fast food firms are always good buys as they have the capacity to expand greatly in a very short while (Lynch 70). It is prudent for every investor to reassess own portfolio every half year to determine the performance of each firm invested in. this enables the investor decide whether to buy more of a given stock or dispose of it in an effort to improve his or her financial position.
Despite the fact that “Beating the Street” was first published over two decades ago, it still is a very applicable piece of literature with great educational benefits to readers regardless of personal acumen in financial investments. It is simply written and veils the massive complexities potential investor often associate with the field. The principles the author cla