“Invest in what you know.”
You’ve likely heard this advice before. People often attribute the idea to investing legend Peter Lynch, the former manager of the Magellan Fund at Fidelity Investments.
And there is something to it. If you’re a doctor, you’re in a better position to spot great opportunities in biotech. If you’re a farmer, you might have better luck investing in commodities like corn or soybeans.
Or maybe you just love Lululemon (LULU) yoga pants so much you bought the stock when it IPO’d in 2007. That would have been a solid move. It took a while to gain momentum, but today, Lululemon has climbed 2,200% above its $14 IPO price.
Inexperienced investors can take the idea a little too far, though.
Even Lynch said as much to The Wall Street Journal:
“I’ve never said, ‘If you go to a mall, see a Starbucks and say it’s good coffee, you should call Fidelity brokerage and buy the stock.’”