The Best Investing Advice I've Ever Heard

When I started investing, I made some pretty serious mistakes, and I lost almost all the money I had put in the stock market.That painful loss broke down my preconceived notions about how Wall Street experts invest and instead left me open to a powerful lesson about the simplicity of investing.Peter Lynch once famously said: "Invest in what you know." And while it's not quite as easy as looking at your sneakers and buyingNike, the fact is that each of us has an area (or possibly many areas!) of expertise -- and we can leverage those to make great investments in fantastic companies.

Here's how.

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Michael Douglass: A lot of people think that investing is really complicated and that it's basically almost impossible to do unless you have some special degree in it. As a result, they never invest. I was one of these people for a very long time. Actually, my very first investment was in a dry bulk shipper, which, if you don't know what that is -- I still don't know what that is. It was not a good investment. It's down about 95% from when I originally bought it. But I am so lucky in a lot of ways. That was my first investment because it taught me a really important lesson. A lesson that legendary investor Peter Lynch has long said, which is that you should invest in what you know. What that means in this case is, it's not that you can just walk into a store, order a coffee, love the coffee, buy the stock, make a million bucks.

What it does mean, though, is that everyone's an expert in something. You may not know everything about the tech space. You may not know anything about dry bulk shippers. You may not know anything about oil companies. But you're a customer of a lot of companies. What's more, you also work in an industry. Because you're a customer or because you work in that industry, you know something about that industry. About who's winning and who's losing. Who you're choosing to put your time and your money toward and who you aren't. Who's doing the best practices and who isn't. That is a very powerful thing that you can apply to make sure that you're investing smart and that you're growing your portfolio over time. That's something we really believe in here at The Motley Fool.

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