155006 01: FILE PHOTO: Investment guru Peter Lynch poses for a photograph in 1993. (Photo by James Schnepf/Liaison)

What is Peter Lynch’s strategy of investing?

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7 minutes, 57 seconds Read

Introduction –

In India most of the investors are financial institutions and big corporate funds, but the small investor ratio is very small compared to UNITED STATE OF AMERICA’s stock market. Till the 1990’s Indian stock market known to very few people of India and it was totally unknown world for the majority of the society. Now the stock market is totally converted into digital platform and transactions having good transparency.

Therefore the Individual level investment ratio is growing very fast and there are few Investors who motivate the investor to invest in stock market like Rakesh Jhunjhunwala and Radhakrishna Damani etc..  We know very little about Peter Lynch, Larry Fink or Jim Simon. As globalization made the information very easy available so we know the legend investor Warren Buffet now very commonly who invest in the stock market.

Therefore, here we want to explain you about America’s most successful Fund manager who gave 29% returns to his investor regularly about 13 years as a active fund manager. The Wall Street media now realized his investment skills and given him a status of Legend of stock market investment of all time. So here we can see his life journey and how became the greatest investor in the stock market.

Who is Peter Lynch? –

Peter Lynch is the famous fund manager of Fidelity Magellan Fund where he has successfully given good returns from 1977 to 1990. When he joined the Fidelity Group he was 33 years old but suddenly after giving good service to the company at the age of 46 he was decided to retire. When he was the fund manager of Fidelity Magellan Fund the company given 13 year’s 29.2% returns to their investors.

He has written various books and article, but in 1989 his successful book was ” One up on Wall Street” is appreciated worldwide and this book was sold around one million copies. Lynch has been described as the Legend investor in the stock market by the financial media. Peter Lynch’s investment principles is ideal to the current investment world of the stock market.

Peter Lynch was born in January 19, 1944 in Newton – Massachusetts USA. When Peter Lynch was 10 years of old his father died with cancer. Therefore very early in his life he started working as a Caddie in Golf course where he works as carry the bags of golfer and doing the moral booster for them. Peter Lynch made his first investment in the college time where in Boston Collage in the second year he made 100 shares of the Flying Tiger Airline of $8 per share and further this share made him $ 80 for each share. Peter Lynch paid his college fees from this fist stock investment of his life.

Fidelity Magellan Fund’s Success –

The Fidelity Magellan Fund is the product of Fidelity Group and the fund manager of this fund is Mr. Peter Lynch from 1977 to 1990 and gives returns about 29%, which better performance than S&P 500 stocks of the United States of America’s stock market. Till the year 2000 the Fidelity Magellan Fund was the number one mutual fund with 100 billion dollar asset management Fund in the US stock market but after 2000 Vanguard Group’s S & P 500 Index Fund take over the position of number one.

The Acuat inception of the Fidelity Magellan Fund was in 1963 from there fund’s Asset under Management amount is $20 million till 1977. When Peter Lynch appointed as a Fund Manager he grew this fund from $20 million to $14 billion Asset Under Management fund. After 1990 there were few new Asset managers comes to Fidelity Group to run this mutual fund, but the foundation set by the Peter Lynch was very important for success of the Fidelity Magellan Fund.

“Buy what you know” The Peter Lynch success formula for the Fidelity Magellan fund, his dream for the fund was to make common investor to professional stock market investor. Peter Lynch’s most favorite stock pick hasn’t come from stock analysis or technical analysis or publication research of the company, but from the experiences of the customers, Street Lag” phenomenon he has taken from his wife who observed the trends of the market by her own experience.

Investing Lessons of Peter Lynch –

  • Peter Lynch’s popularized idea of investing is “Growth at reasonable Price” ( PE Ration divided by per share growth rate) as a metric and he regarded as PEG about 1.0 or below to be the indicator of inherent value of the investment.
  • Peter Lynch always picks his stock by the advice of his wife, this is called “street lag” phenomenon. His wife observed the market trends while doing shopping and also the behaviors of common investors rather than technical analysis and publication research of the company.
  • In 1989 the Fidelity Magellan Fund had 1400 stock picks that unknown to other stock market investors
  • Peter Lynch created the investment strategies for the Fidelity Magellan Fund is ” Buy what you know” which is very successful in his 13 years to the company, where he gives 29% returns to the investors.
  • Peter Lynch hasn’t invested in diversified stock investment strategy, rather than investing in the same industry, which was quite risky, but this strategy work for him and the company.
  • When Peter Lynch joined the Fidelity Magellan Fund the company has 60 stocks as an asset under management, investment, but after that he trimmed the number to 30 stocks.
  • “Random walk hypothesis” and “efficient market hypothesis” is contradictory to the professional activities of the stock market professional , so Peter Lynch always advise the investor to believe in practical work than theoretical work about the stock market.
  • Peter Lynch always advises the investor that don’t buy a stock of over priced rather buy a reasonable price stock with analyzing the company’s future performance.
  • Peter Lynch coined the baseball theory into the stock market ” ten bagger and four bagger” where the investment value must be ten times greater from its original purchase price.

Fidelity Investments Success & Peter Lynch-

Fidelity Investments is commonly known in the financial business world as a Fidelity and its a America’s successful Asset Management company.Edward Johnson-II who is the founder of Fidelity had a Billionair and Lawyer in America. His grand daughter The company was established in 1946 and it has  $4.5 trillion assets under management & $ 11.8 trillion Asset under Administration till the date December 2021.. Abhigail Johnson is the CEO of Fidelity who is America’s billionaire businessman and she is is the granddaughter of Edward Johnson-II.

The fidelity Investments core business is Brokerage firm, manages large mutual fund family, provides funds distribution and investment advice. Index Funds, Retirement services, wealth management, securities execution and clearance any many more finance related services. Their main competitors in the world market is BlackRock company and Vanguard Company.

Peter Lynch join the company at the age of 33 and he serves the fund manage Fidelity investments for 13 years and after that he resign the job and remain as a Investment adviser and mentor for the company. Recently in 2019 Fidelity CEO Abhy Johnson celebrated his 50th anniversary with the Fidelity Investment and express the value he was given to Fidelity Group. Peter Lynch resigns the company when he was in top position of his career, but still manage to be a millionaire and donate his most of the amount to social causes.

Peter Lynch’s Achievements & Philantrophy –

  • As per the Boston Magazine Peter Lynch is the 33rd richest person of the city who has a net worth of $ 450 million.
  • Peter Lynch has given $ 100 million to various charities in his life.
  • Peter Lynch has given these charity money mainly though five ways – Indivually, Lynch Foundation, Fidelity Charitable Gift Fund, and two charitable trusts.
  • As he was appointed in Fidelity Investments in 1977 through 1990 as a fund manager and gives his investors 29% returns as more compare to S&P 500 index of the US stock market.
  • Peter Lynch has written various books and articles, but Peter Lynch’s famous book is “One up on Wall Street” best seller book in the financial world.
  • Peter Lynch is established in the financial world and Wall street media as a Investment Legend of all time.
  • Fidelity Investment Group celebrated his 50 years with Fidelity in 2019 and company’s CEO Abhy Johnson express her views through social media about value given by him to the company.

Conclusion –

Peter Lynch has very short profession of the fund manager at his life, but he remains as a adviser and mentor to the Fidelity Investment after 1990. The Stock market changed after 1990 to computer technology and now today as Anroid mobile technology where mobile app is created by many asset management companies in the market  through all over the world.

Peter Lynch has given his investment philosophy with the base of logic rather than technical analysis and mathematics skills. So Peter Lynch is a real legend of all time in the investment world with his fundamental skills towards investment. He proves his knowledge with the mutual fund and given good returns on it therefore his investment skills is still relevant to the all small investors who wanted to enter in stock market.

As far as India is concern investment in the stock market has huge space still in the future and smaller investor has to attract towards the stock market. The global stock markets also available to all the investors in India to invest where added feature of part of investment in one share is available in the foreign stock market. Online stock market and algorithm facility have been given by these international stock brokers to the Indian Investors. So we have lots of opportunities to invest in the stock market with good companies.

JIM SIMONS ALGORITHM STRATEGY 

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