Twenty-five years ago, Peter Lynch stepped down as manager of Fidelity’s Magellan Fund, bringing to an end a successful 13-year run during which he averaged a 29.2% annual return.
Lynch is credited with the investment strategy of “investing in what you know,” but in a recent Wall Street Journal article, he tries to set the record straight, claiming he’s been misinterpreted over the years.
Lynch says that the statement has been oversimplified and overlooks the need for solid fundamental company analysis before making an investment.
“People buy a stock and they know nothing about it,” Lynch says. “That’s gambling and it’s not good.”
Lynch suggests using your specialized knowledge–looking at companies in the field where you work–to identify stocks you can more easily analyze and study to decide if they are worth owning.
As part of its mission to help individual investors become better managers of their own assets, AAII covers a variety of investment strategies, including Peter Lynch’s. Here are some resources available to AAII members:
- The Peter Lynch Approach: Investing in “Understandable” Stocks
- Investment Wisdom From Wall Street’s Legends
- The Pete Lynch Investor Personality Test
These articles are only a few examples of the many benefits of AAII membership. To learn more, consider a risk-free 30-day Trial AAII Membership to start becoming an effective manager of your own assets.