Peter Lynch is one of the most successful and well-known investors of all time. Lynch is the legendary former manager of the Magellan Fund at the major investment brokerage Fidelity. He took over the fund in 1977 at age 33 and ran it for 13 years. His success allowed him to retire in 1990 at age 46. His investment style has been described as adaptive to the prevailing economic environment at the time, but Lynch always stressed that you should be able to understand what you own.
Key Takeaways
- Peter Lynch is one of the most successful investors in history.
- Lynch's love for investing began in his early years working as a caddy.
- At age 33, Peter Lynch was appointed to manage the legendary Magellan Fund at Fidelity.
- The fund earned an annualized return of 29.2% during his time running it, more than twice what the S&P 500 earned during that time.
- After 13 years managing the Magellan Fund, Lynch retired in 1990 at age 46.
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Early Life and Education
Peter Lynch was born in 1944 in Newton, Massachusetts. When he was ten years old, his father, Thomas Lynch, died from cancer. To support the family, his homemaker mother entered the workforce, and Peter began working as a caddy. While working at an upscale golf club, he developed an interest in the stock market through conversations he overheard.
Peter earned a caddy scholarship and later attended Boston College, where he graduated in 1965 with a degree in finance. A year later, he worked as a summer student at Fidelity.
One of Lynch’s first successful investments was in an air freight company called Flying Tiger, which helped him pay for graduate school. In 1968, Peter graduated from the University of Pennsylvania Wharton School of Business with a Master of Business Administration and married Carolyn Hoff. From 1968 to 1970, he served in the Army ROTC program.
At age 25 and after caddying for Fidelity's president, Lynch got his first full-time job as a textiles and metals analyst at Fidelity.
Notable Accomplishments
In 1977, Lynch took over the Magellan Fund, a small, aggressive capital appreciation fund created in 1963 that held mostly domestic investments. Under his management, the fund returned an average of 29% per year and outperformed the S&P 500 for all but two years. Many investors commonly point to Lynch as an example that active management can achieve superior results relative to the benchmark.
Under Lynch's tenure, the Magellan Fund grew from from $20 million to $14 billion in assets under management.
Peter is also well-known for his "Buy what you know" investment slogan, which asserts that investors should invest in companies they are familiar with and understand so that they can develop reasonable expectations about the companies' growth potential and prospects.
Published Works
Lynch is the author of three bestselling investment books, One Up on Wall Street (1989), Beating the Street (1994), and Learn to Earn (1995). Co-written with John Rothchild, One Up on Wall Street, details how the average investor can use what they know to achieve financial success. Beating the Street details his method for investing and how to pick solid investments, and Learn to Earn teaches investors how to read financial reports, stock tables, and other investment reports.
About one in every 100 Americans participated in the Magellan Fund when it was run by Lynch.
Legacy
Lynch is credited with inventing the price-to-earnings-growth (PEG) ratio, which helps investors determine whether a stock is inexpensive given its growth potential, along with other stock valuation methods popular with value investors. Lynch thinks individual investors can perform well by investing in what they know and by getting to know a company, its business model, and its fundamentals.
Lynch believes in investing for the long term and choosing companies whose assets Wall Street has undervalued. He also thinks companies with historically below-average price-to-earnings ratios for their industry and for the company have the potential to perform well.
In 2023, Lynch said he regretted not buying Apple. "Apple was not that hard to understand. I mean, how dumb was I?" He also said he regrets not investing in chipmaker Nvidia.
Philanthropy
Peter and Carolyn Lynch created the Lynch Foundation in 1988 to support education, Roman Catholic missions, the preservation of culture and history, and health and wellness. The Lynch Foundation follows a similar principle to Peter's investment strategy by investing in what appeals to you to realize great rewards.
In 1999, Peter and Carolyn gifted $10 million to his alma mater, Boston College. It was, at that time, the largest gift since the institution's inception. In return, the college honored them by naming their School of Education the Lynch School of Education.
In 2010, the Lynch family gifted $20 million to Boston College to form the Lynch Leadership Academy, furthering their mission to support education in Massachusetts.
In 2021, Boston College reached another gifting milestone, again from Peter Lynch. From his and his late wife's private collection, he gifted more than $20 million in art, including Pablo Picasso paintings, to Boston College's McMullen Museum of Art and a $5 million grant.
What Is Peter Lynch Known For?
American investor and philanthropist Peter Lynch is known for managing the Magellan Fund for 13 years, for his "buy what you know" investment phrase, and for creating the price-to-earnings-growth (PEG) ratio, which tells how expensive a stock is compared to its growth potential. Under his management, the Magellan Fund returned approximately 29% per year and outperformed some of the most well-known indexes.
What Is Peter Lynch's Strategy of Investing?
Peter Lynch's investment strategy includes selecting stocks from companies that he is familiar with and then evaluating their business models, competitive landscapes, growth potential, and more before investing. He also stresses that undervalued stocks with great growth potential could yield large returns, and diversification should be employed to spread out risk.
What Does Peter Lynch Do Today?
Peter Lynch is the vice chairman of Fidelity and remains an active philanthropist.
The Bottom Line
Peter Lynch is the former manager of the Fidelity Magellan Fund and a world-renowned investor, credited for creating the price-to-earnings-growth (PEG) ratio and popularizing the "buy what you know" investment strategy. For 13 years, Lynch successfully managed the Magellan Fund, which generated returns of approximately 29% annually. From his humble beginnings working as a caddy to managing a famous fund, Peter Lynch has become one of the most well-known figures in the world of finance.
