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Here's How Legendary Investor Peter Lynch's Strategy Would Work in Crypto

Mon, 04/17/2023 - 08:56
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Arman Shirinyan
Popular yet profitable strategy can be applied to cryptocurrency market, but there's a catch
Here's How Legendary Investor Peter Lynch's Strategy Would Work in Crypto
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Peter Lynch is regarded as one of the most accomplished investors of our era. From 1977 to 1990, Lynch managed Fidelity Invest's Magellan Fund, which delivered an impressive average annual return of 29.2%. Under his leadership, the fund's assets grew from $18 million to $14 billion, thanks to the "Growth At a Reasonable Price" (GARP) strategy that combines principles of value and growth investing. Educational writer Zerko Ika applied it to the crypto world.

Investing in industries or specific companies one is familiar with can help one uncover undervalued assets. In the crypto context, this might involve focusing on a specific niche such as DeFi, NFTs or Layer 2 solutions. Conducting thorough fundamental analysis before investing in any altcoins is essential for success. Lynch coined the term "Ten Baggers" to identify stocks with the potential to grow tenfold from their original purchase price.

Value-investing principles dictate that paying attention to negative rumors about a company can lead to lower purchasing prices. In the crypto world, FUD (Fear, Uncertainty and Doubt) can be harsh, but it can also offer buying opportunities. For example, when news of a lawsuit against Binance's CEO by the CFTC caused the price of BNB to drop by 5% daily, this created an opportunity for savvy investors.

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Diversification can reduce risk, but it can also dilute profitability and make it harder to manage investments. Striking the right balance between diversification and concentration is crucial.

Regular portfolio reviews can help maintain a healthy mix of investments and counteract cognitive biases, such as sunk cost bias. This involves monitoring your holdings, rebalancing your portfolio, evaluating potential new projects and cutting losses on underperforming assets.

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About the author

Arman Shirinyan is a trader, crypto enthusiast and SMM expert with more than four years of experience.

Arman strongly believes that cryptocurrencies and the blockchain will be of constant use in the future. Currently, he focuses on news, articles with deep analysis of crypto projects and technical analysis of cryptocurrency trading pairs.