I liked it so much I bought the company

Buying shares in companies you know is age-old advice. Is there any substance to it, and should you invest for the perks? Matthew Partridge investigates.

One piece of advice often given to investors who are just starting out is to "buy what you know". It's a phrase most associated with Peter Lynch, one of the investment superstars of the 1980s. Lynch delivered returns of nearly 30% a year when he was running the Fidelity Magellan Fund from 1977 to 1990, beating the S&P 500 index in 11 of those 13 years. As a result, the fund's size ballooned from $18m to $14bn during the same period. He was very much a stockpicker, with a focus on hunting for "ten-baggers" fast-growing stocks with the potential for rising tenfold or more.

In his bestselling book, One Up On Wall Street, Lynch argued that individual investors can get an edge on professionals simply by keeping their eyes open on the high street and in their place of work.For example, one of Lynch's most successful investments was in Hanes, a company selling hosiery. He decided to buy after his wife tested a line of tights made by the company and raved about how great they were.

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Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri