Legendary investor Peter Lynch says this is the #1 “key to making money in stocks”

Peter Lynch is one of the investment legends with published works that I believe should be mandatory reading material for all beginning investors. The market-crushing investor who ran Fidelity’s Magellan fund between 1977 and 1990 has a lot of “common sense” wisdom to share with investors who seek to do well over the long run. While following his words may not lead to similar market-crushing results, I do think that most investors would be better able to stand out of their own way as they look to build immense wealth in markets.

Perhaps the one quote that should resonate with beginners is: “The key to making money in stocks is not to get scared out of them.” Indeed, people tend to be overly emotional when it comes to money made and lost in the stock market. As you may have heard, the average person is pained more by a $1,000 loss than delighted by a $1,000 gain.

So, when the stock market eventually reverses course, even in a historically mild manner (let’s say a 10-15% correction, which is really nothing all too remarkable in the stock market’s 100-year history where extraordinary events, crises, and crashes have occurred), you can bet that nerves will be rattled and irrational investment moves will be made.

New investors shouldn’t fear the market drops or have confidence in their ability to avoid them.

As a new investor, it’s just way too easy to tell yourself you’ll stay in during the bull market and get out once the bear is ready to come knocking. This kind of mentality is pretty dangerous, especially since there’s no way to tell for sure when a peak or trough in stocks is about to be hit. Ask any beginner investor, and they’ll point to you on the stock chart when they have bought and sold. Sounds pretty easy on paper.

However, it’s impossible to put into practice since the chart for the next year and decade has not yet been put in ink. As such, it’s hard to tell if yesterday’s market minor 1% drop is the start of something far more horrific or if it’s complete noise or even a buying opportunity.

Unless you’re a time traveler from the future, you’re probably not going to be able to time the market in a way to beat the S&P 500.

In fact, you’ll probably rack up the commissions as you buy when you feel greedy and sell while in a state of fear. Instead of scaring yourself out of markets over news that other investors have already reacted to, I’d say it’s more constructive to sit on your hands and wait things out, at least until you’re able to make a rational decision, which may entail buying shares on a dip rather than selling.

Indeed, braving market volatility is all part of being a well-rounded investor. If you stick with Lynch’s other piece of advice by investing in what you understand, you’ll probably be less fearful once the next market correction comes rolling around.

You don’t need to be a genius to make money in stocks, according to Lynch.

Take it from an investing legend. As Lynch famously said, “You don’t have to be a genius to make money on Wall Street. You just have to be more disciplined than the average investor,”

Again, it sounds so easy on paper. But when volatility strikes, it’s easy to follow the herd and be no different from the average investor who’s hitting the panic button. Building the right mindset and discipline is a skill not learned overnight. As such, new investors should only invest in businesses they’d be willing to double down on in the face of a market correction.

A correction is just one of the things investors will have to invest through rather than seek to avoid. By investing through them and buying into them, investors would likely be far better off than seeking to avoid them as they buy and sell stocks, likely at the worst of times.

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