Peter Lynch — who took the Fidelity Magellan fund to formidable heights — says the best way to heal your portfolio is to know 10 stocks extremely well and buy them when their prices are attractive.
"There are 7,000 or 8,000 public companies," Lynch told the Business Insider.
"You really ought to know 10 cold. All you need is a few good stocks a decade.”
Though Lynch agrees that corporate bonds are more attractive than money markets, he finds stocks even more appealing.
Market bargains are so plentiful now, Lynch says, "you feel like a mosquito in a nudist colony."
Generous time horizons are critical, Lynch notes. Hoping things will be better in a few weeks won’t work.
“Even one year, two years is not long enough,” he says. “I'm very happy and content that five, 10, 15 years from now, corporate profits will be higher and the stock market will be a lot higher.”
Lynch advises investors to buy what they know.
“If you're in the insurance industry, you're going to see things get better before I see them,” he says. “You have a huge edge on the professionals.”
Picking individual stocks, however, can be a dangerous practice, says Buckingham Asset Management principal Larry Swedroe, a long-term advocate of passive index investing.
Swedroe says even bond investors must be cautious, the Financial Post reports, because the broker-dealer community often exploits individual investors with markups when investors buy bonds and markdowns when they sell bonds.
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