Legendary investor, billionaire and former manager of Fidelity’s Magellan Fund Peter Lynch often shares basic money and investing insights with a focus on long-term investing. His principles, opinions and investment vision remain deeply popular with both aspiring investors and seasoned professionals.
Quote of the day by Peter Lynch
“Great companies become risky investments when people overpay for them.”
What does Peter Lynch’s quote mean?
The quote above is an excerpt from Peter Lynch’s first book, 1989’s One Up on Wall Street, which is based on the ace investor’s experience as a portfolio manager at Fidelity’s Magellan Fund, which generated 29% annual returns from 1977-1990. He turned the fund from $20 million to $13 billion, cementing his name in the legendary Investor Hall of Fame.
Although the book is decades old, it provides invaluable ideas and insights for investors looking to navigate the challenges and complexities of the stock markets. And the visionary believes one key strategy is to only buy stocks at the right price.
Lynch believes that paying too much can turn “amazing” companies into risky investments. And he is not alone. Berkshire Hathaway’s Warren Buffett took this from his biggest mistake: “If you pay too much for them, you can turn a good business into a bad investment.”
What this really means is that a good business should grow and provide a higher rate of return than what you spent on it. But if you’re paying too much just because you’re attached to a name or company and it’s not producing adequate returns – that’s a loss.
Lynch has often advised that investors should train themselves to identify undervalued companies with strong fundamentals and look for hidden gems beyond the household names. This is the key to creating real wealth and can reveal a number of great opportunities.
Who is Peter Lynch?
Peter Lynch’s legacy is built primarily on his extraordinary 13-year tenure (1977-1990) as manager of the Fidelity Magellan Fund. During this period, he transformed a relatively obscure fund into the largest mutual fund in the world, growing its assets under management from $20 million to more than $14 billion.
Even more impressively, it delivered a stunning average annual return of 29.2%, nearly doubling the return of the S&P 500 over the same period.
After retiring from Magellan at the young age of 46 to spend more time with his family, Lynch continued to be an influential figure.
He is the author of several bestselling books, including One Up on Wall Street and Beating the Street, which demystified multi-million dollar investments and cemented his reputation as a champion of the individual investor.
Disclaimer: This story is for educational purposes only. The above opinions and recommendations are those of individual analysts or brokerage firms and not of Mint. We encourage investors to check with certified professionals before making any investment decision.
