Peter Lynch was a big proponent of the “invest in what you know” philosophy. In fact, many of his most successful investments were a result of following his wife and teenage kids around the shopping mall or driving through town eating Dunkin’ Doughnuts. Often, the story is told of a single man who became such an expert in American water companies that he literally knew the profit in a tub full of bathwater or the average toilet flush. He became very rich from investing in that field only.
One caveat: You must be honest with yourself. Just because you worked the counter at Chicken Mary’s as a teenager doesn’t mean you are automatically going to have an advantage when analyzing a poultry company like Tyson Chicken. A good test is to simply ask yourself if you know enough about a given industry to take over a business in that field and be successful. If the answer is yes, you may have found your niche.
