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Miguel Barbosa
Miguel Barbosa
Articles (5983)  | Author's Website |

An Interview With Legendary Investor Peter Lynch

February 24, 2010

H/T Value Investing Resource & Corner of Brk & Fairfax

Synopsis: (via Globes) – The so-called lost decade has not shaken legendary investor Peter Lynch’s belief that the stock market will continue to offer the best returns.

Introduction (via Globes)

The dismal returns of the past ten years have made them known as the lost decade on the US stock market, raising the question whether investment in stocks has lost its luster. Who better to answer that question than the person considered one of the best mutual fund managers in US history, Peter Lynch?

Lynch, 66, the legendary manager of the Fidelity Magellan fund, took over the running of the fund in 1977, and from then until he left the post in 1990, he managed to beat the S&P 500 Index in 11 years out of 13. Under his management, the fund yielded an exceptional annual return of 29.2%, almost double the average for the index of 15.8%. The greatness of Lynch’s achievement can be seen from the fact that even today, 20 years after he stopped managing the fund, his books “One Up on Wall Street,” “Beating the Street,” and “Learn to Earn,” are still best sellers among investors.

Most Important Advice!!!! (via Globes)

“In general, stock market companies have succeeded in growing their profitability, and that’s the reason to buy shares,” Lynch sums up. “When you buy shares in a company, if it manages to produce profits, you are a partner in those profits. On the other hand, if you buy an IBM bond, after 20 years, the company will repay you the money and say ‘thank you very much.’ It will pay you the interest, but it will not be loyal to you, and you certainly will not enjoy the fruits of its success. That’s the big difference between bonds and stocks.”

You need 3-4 good stocks

What’s the right way to be exposed to the stock market today?

“The average person can get to know 5-10 companies very well, and once every few years he will come across an opportunity to make a good investment. In principle, you need 3-4 good companies to invest in over ten years. You don’t need 3-4 good stocks every week, if you are a private investor.

Click Here To Read: An Interview With Legendary Investor Peter Lynch

Miguel Barbosa


About the author:

Miguel Barbosa
Miguel Barbosa is founder of the multidiscplinary blog SimoleonSense.com. SimoleonSense examines value investing through a lens of behavioral finance, complex systems, psychology, philosophy, and neuroeconomics. Miguel's heros are his parents, Charlie Munger, Charlie Rose, Warren Buffett. Miguel Barbosa holds a Masters of Science in Management and a Masters of Arts in International Business. Miguel received his Bachelors of Liberal Arts and Sciences (with a concentration in Cognitive Psychology) from the University of Florida. Currently, he is working on obtaining his CFA designation (passed the first level in 2009)

Visit Miguel Barbosa's Website

Rating: 3.8/5 (14 votes)


Max7777 premium member - 7 years ago

Great comment on his own strategy to get 29.2 % ROI:

"When you look at big companies, you see that their growth slows down eventually, because they're too big to grow at high rates over time. On the other hand, small and medium size companies, which are generally considered riskier, grow faster over time. Therefore, there are opportunities in every kind of company. But I achieved my success thanks to a focus on companies of a small and medium order of size. I try to buy big companies only when they are at a turning point, after their position has improved following a crisis. That's how it is in the vehicle industry, airlines, and other industries."

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