Learn to Earn: Book Summary and Highlights
Peter Lynch and John Rothchild’s Learn to Earn holds sentimental value to me because it introduced me to the world of investing. Readers obtain a great deal of financial literacy and valuable investing knowledge.
- Matthias Hagemann
Learn to Earn delivers a ton of history, amazing case studies, and conversational-style investing lessons conveyed in laymen’s language. For the 13 years that Peter Lynch managed Fidelity’s Magellan Fund (1977–1990), he earned a reputation as a top performer, increasing assets under management from $18 million to $14 billion.
While One Up on Wall Street by the same authors is more popularized (in which Lynch introduced the term ‘tenbagger’ for holdings stocks that grow at least 10 times), I think this book is a much better read.
Who Should Read It
The book is specifically written for beginning investors with little to no investment experience. Its objective is to fill the gaping void in our financial literacy when it comes to investing topics:
“The junior high schools and high schools of America have forgotten to teach one of the most important courses of all. Investing.”
Give it to your children in high school and I bet it will define the way they navigate financial markets for the rest of their lives. For people who are generally interested in history and appreciate a money twist to it, this is also an insightful read.
How the Book Changed Me
It’s fair to say that practically everything in modern human history happened because of money. The first part of the book “A Short History of Capitalism” was particularly profound because I learned about the founding history of America, the establishment of the first stock exchange, up to the biographies of many ubiquitous brands today.
“As far back as 1602, Dutch people were buying shares in the United Dutch East India Company. This was the world’s first popular stock, sold on the world’s first popular stock exchange, which operated from a bridge over the Amstel River in Amsterdam.”
It also helped me put complex events such as the Great Depression into context:
“Most historians will tell you the Depression wasn’t caused by the Crash of 1929, although it often gets blamed as the cause. Only a tiny percentage of Americans owned stocks at the time, so the vast majority of people didn’t lose a penny in the Crash. The Depression was brought about by a worldwide economic slowdown, coupled with the government’s mishandling of the money supply and raising interest rates at the wrong time. Instead of putting more cash into circulation to perk up the economy, our government did just the opposite, pulling cash out of circulation. The economy came to a screeching halt.”
The book demonstrated that most businesses in Corporate America, however large, started unnoticeably small. The obscure origins of Coca-Cola and McDonald’s are such portrayals. With vision and perseverance, these businesses grew large. Sometimes, its original founders weren’t the right fit and were ousted as more visionary entrepreneurs took over.
This was a defining insight in my investment journey as I realized that I have a chance at spotting businesses that can become a megabrand one day.
It pays to put your money to work early and to only invest in what you can understand. The compounding will do wonders and you piggyback the growth of the businesses you’re invested in.
“Warren Buffett […] got there by saving money and later putting it into stocks. He started out the way a lot of kids do, delivering newspapers. He held on to every dollar he could, and at an early age he understood the future value of money. To him, a $400 TV set he saw in the store wasn’t really a $400 purchase. He always thought about how much that $400 would be worth twenty years later, if he invested it instead of spending it.”
A shareholder would be happy to walk into a place in which he has ownership because he knows that all that money earned is split, and one part of that share will end up in his wallet.
I learned to look behind the surface-level price action of stocks, and to focus on what a stock represents: a part of a tangible business that you can own. That’s the reason why I never trade, let alone day-trade stocks actively. In my eyes, stocks are meant to be held indefinitely. I do active trading with futures contracts only.
Although the book was written in 1995, when the internet wasn’t a thing yet, the core principles taught in it are timeless and still of great relevance today. The authors did a great job at making the world of investing accessible.
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About Matthias Hagemann
I share my 15+ years of trend following experience. Aspiring traders come to me because they want to make consistent profits without stress and without day-trading.