Ever since his successful management of Fidelity’s Magellan mutual fund from 1977 to 1990, his retirement, Peter Lynch has been regarded as one of Wall Street’s greatest legendary investors. A year after graduating from the Wharton School of the University of Pennsylvania with a Master of Business Administration in 1968, he began working for Fidelity Investments where he had previously been hired as an intern in the summer of 1966. While at Fidelity, Lynch managed to successfully increase the Magellan Fund from $20 million with only 40 stocks in the portfolio to $14 billion with 1,400 stocks, averaging an annual return of 29.2%, as well as consistently outperforming the S&P 500 market index.
Given his great success, experience, and…show more content… He says so because first, you may not be familiar with the company and second because you will not know if there is any change of information with that particular company. He then, may have decided not to invest in said stock after all, and only you will be left at a loss. This is why Peter Lynch greatly emphasizes throughout his book on the importance of only investing in companies of which you fully understand the nature of their business and believe in it.
Peter Lynch poses three important questions to the investor in order to self-evaluate their financial position as well as mental state before deciding to invest in the stock market: (1) Do I own a home? He advises that buying a house first is the best type of investment you can make as it, in the long-run, just as stocks, always appreciates in value. (2) Do I need the money now? Only invest money you can afford to lose and will not be needing in the near future. (3) Do I poses the personal qualities necessary to succeed in stocks? Some of the personal qualities Lynch deems necessary are lots of patience, ability to ignore the general panic, tolerance for pain, open mindedness, persistence, and common sense.
In his book Lynch talks about developing the “company story” before investing in the stocks of any company. Being able to develop the story comes from conducting the research of the company’s financial health and