Peter Lynch is an American investor, mutual fund manager, author, and a philanthropist who rose to prominence from a poor background.
Lynch was the former manager of Magellan Fund at the Fidelity investment for 13 years (1977 – 1990) where he averages an annual return of 29.2%.
He is known as a conservative investor with his strategy described as adaptive to the prevailing economic environment and investment in what you know about.
In this article we will explore the biography of Peter Lynch, but above all the investment philosophy of this legendary American investor. We will also see the best quotes said by P. Lynch, his books and his investment portfolio.
Early life of Peter Lynch
Peter Lynch was born on January 19, 1944 in Newton Massachusetts and in 1951 his father was diagnosed with brain cancer. Three years later, he died and Lynch's mother and himself are left to fend for the family.
Lynch reports that he started work at a golf club as a caddie to support his family. While working at the upscale golf club, he developed interest in the stock market through conversations he overheard.
Luckily, Peter earned a caddy scholarship and later attend the Boston College and graduated in 1965 with a degree in finance. While in College, Peter used his savings to buy shares of the Flying Tiger Airlines at $7 per share. The stock later rise to $80 per share, the profit from which he could pay for his education.
In 1968, Peter, graduated from the University of Pennsylvania Wharton School of Business with a Master of Business Administration and Married Carolyn Hoff.
At 25 years old, after caddying for Fidelity's President, Lynch got his first full-timr job as a textile and metals analyst at Fidelity Investment .
Peter Lynch is considered one of the best and most successful investors and fund managers of all time. For many, his career in the US stock market was not very exciting, but it was extremely successful. Peter Lynch, with a silver and unmistakable hair that reflects experience and the passage of time, is for his admirers one of the living legends (like so many others in the United States) of our time.
He is also famous for his book Beating the Street.
The Magellan Investment Fund of Fidelity Investment by Peter Lynch
in 1977, Lynch was named the head manager of the then unclear Magellan Fund which worth about $18 million in asset. Lynch worked as the manager for 13 years and he was able to grow the fund asset to more than $14 billion with over 1,000 individual stock position.
Peter Lynch, managed the largest and most important investment fund in the United States, the Magellan Investment Fund, by Fidelity Investment, one of the most powerful investment companies in the world. Anyone who entrusted Lynch with $10,000 at the beginning of his management, 13 years later would have no less than $280,000 in his account.
While taking over the Magellan fund, Lynch had no restriction on what asset he could buy other than the ones the laws enforced. He invested in individual companies rather than any overarching strategy, starting with large U.S companies and gradually shifting emphasis to smaller and international stocks.
Between 1977 and 1990, the American investor averaged a 29.3% annual return and as of 2003, he had the best 20-year return on any mutual fund ever.
Peter Lynch's investment philosophy
The philosophy that Peter Lynch uses for his investments has achieved for hundreds of thousands of investors and small savers who trusted their dollars to Fidelity, an average annual gain of 27%. And the strategy is similar to those used by other successful investors on Wall Street like Buffet or Templeton, who with their investment methods achieved and still achieve, to make many Americans happy and rich.
He advises savers to invest long term as this is how the best and safest gains are obtained. Companies are destined and programmed to grow. The best firms obtain excellent and growing profits year after year, which in turn drives the price of the shares upwards. On Wall Street, growing profits are seen very favourably.
Peter Lynch also advises having patience and not going crazy with the pirouettes of the markets and falling prices. Other gurus follow the same investment recipe, and have become legends.
What is the basis of Peter Lynch's success? Does he have a crystal ball? Is he a seer? Is he a finance genius? A mathematical prodigy? Is he a brilliant and visionary strategist?
None of that. Possibly, Peter Lynch invests with a very fine-tuned common sense. And he himself gives us a hint that you don't have to be a magician to successfully invest money. Peter Lynch said it:
“I invest in company stocks that even an idiot could manage. The important thing is an excellent product and a good brand.”
To verify the products of the companies where he invested, he regularly visited supermarkets and also specialized businesses. He chatted attentively with customers and employees trying to assess whether they were happy and satisfied with the products of the chosen firms. A simple procedure to get a real impression of the risks and chances in the investment.
As we can see, compared to George Soros and Warren Buffett, Peter Lynch was a simpler and more accessible investor. His investment philosophy was based on the idea that anyone, with a little knowledge and effort, could be a good investor or even become the best investor in the world.
Some tips from Peter Lynch
- Buy shares of companies you know.
- Take responsibility for investing.
- Do not delegate decisions to others.
- Stay informed constantly.
Currently Peter Lynch lives retired from the ups and downs on Wall Street. The investment guru has a chaotic office in Boston, where he receives his visitors, and whose desk is a complete mess of spreadsheets, papers, reports and charts.
Peter Lynch is a member of the board of directors of Fidelity and is dedicated to raising money and contributions for organizations dedicated to charitable works. He has a secure old age. In his free time, he enjoys his family and hobbies.
The most Famous and Characteristic phrases of Peter Lynch
“Every legend in their life has pronounced phrases that remain for the memory. And Peter Lynch was not going to be less.”
“Never invest in an idea that you can't illustrate with a pencil.”
“Don't follow my steps, because even if you get it right when buying, you won't know when I sell.”
“More money has been lost preparing for corrections or trying to anticipate corrections than the money lost in the corrections themselves.”
“You can lose money in the short term but you need the long term to make money.”
“Selling your winning stocks and holding the losers is like cutting the flowers and watering the weeds.“
“People don't have the patience to get rich slowly, so they decide to ruin themselves quickly.“
“The key to making money with stocks is not to be afraid of them.”
Best Books by Peter Lynch
Peter has a facet of disseminator through which he dedicates himself to writing books. Where most of them have become Best sellers, in several languages and countries.
Let's see a list with his best and most famous books:
- One Step Ahead of Wall Street: How to use what you already know to make money in the stock market.
- Beating Wall Street: Peter Lynch with the collaboration of John Rothchild.
- Learn to Earn: A Beginner guide to the basics of investment and business with John Rothchild.
FAQs about Peter Lynch
What is Peter Lynch's primary investment theory?
Peter believes in buying what you know about. He is well known for his ‘Buy what you know' slogan which asserts that investors should invest in companies they are familiar with and understand so they they can develop reasonable expectations about the company's growth potential.
What is Peter Lynch famous quote?
Go for business that any idiot can run – because sooner or later, any idiot probably is going to run it.