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TeachMeFinance.com

Peter Lynch


Peter Lynch was born in 1944 in Newton, Massachusetts. He studied at Boston College and graduated in 1965 with a finance degree. He then spent two years in military service. After Lynch returned to his studies, he graduated with a MBA from the University of Pennsylvania in 1968. He got a job as an investment analyst with Fidelity Investments and became the director of research at the same firm. He held this position from 1974 until 1977.

In 1977 Lynch was named manager of the Magellan Fund and achieved historically high levels of success with this portfolio until he retired in 1990. Under Lynch’s management, the assets of the Fidelity Magellan Fund increased from $20 million to $14 billion. He also reportedly outperformed the S&P 500 Index benchmark in 11 out of 13 years by achieving an average return of 29%.


Lynch has often been described as a chameleon because of his ability to adapt his investment style to suit the market conditions. He was well-known for working very long hours and talking to executives, experts, investment managers and analysts at all times of the day. Lynch consistently applied the following eight fundamental principles when selecting stocks:

  • Know what you own.

  • Don’t try to predict interest rates or the economy. The futility of this is highlighted in the following quote from Lynch: "If you spend more than 13 minutes analyzing economic and market forecasts, you've wasted 10 minutes."

  • Avoid long shots.

  • Take the time to identify exceptional companies. Lynch once said, "If you stay half-alert, you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall, and long before Wall Street discovers them."

  • Look for businesses with good management.

  • Learn from your mistakes.

  • You should be able to explain your purchases before you make them.

  • There’s always something to be worried about.

A core position for Lynch involved sticking to stocks and companies that he was familiar with and could understand. He was also interested in investing in simple businesses and once advised to "Go for a business that any idiot can run – because sooner or later, any idiot is probably going to run it." Lynch was committed to due diligence and he said, "Investing without research is like playing stud poker and never looking at the cards." Lynch used a bottom-up approach to concentrate on the fundamentals of the company that he was researching.

Lynch was a long-term investor who wasn’t interested in the short-term fluctuations of the market. He was once quoted as saying, "Absent a lot of surprises, stocks are relatively predictable over twenty years. As to whether they're going to be higher or lower in two to three years, you might as well flip a coin to decide."


Two of the seminal books written by Lynch, "One Up On Wall Street" (1989) and "Beating The Street" (1993), are generally considered to be required reading for anyone interested in investing.

Since his retirement in 1990, Lynch has been actively involved in several philanthropic endeavors.

Peter Lynch’s publications include:

One Up On Wall Street : How To Use What You Already Know To Make Money In The Market

Beating the Street

LEARN TO EARN



About the author

Mark McCracken

Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English".


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