How to Avoid Investing Self-Sabotage
In 1966, Peter Lynch began as an intern with Fidelity Investments.
He got his foot in the door because he caddied at Brae Burn Country Club in West Newton, Massachusetts, for Fidelity’s president at the time, George Sullivan.
After returning from a two-year stint in the U.S. Army in 1969, Lynch got on full time with Fidelity. He started as an analyst following textiles, mining and chemicals.
From the beginning, it was apparent that Lynch was a gifted investor. Within five years, he advanced to become Fidelity’s director of research.
Then, in 1977, he got his big break…
Lynch was put in charge of a tiny fund named Fidelity Magellan. When Lynch took over Magellan, it had a paltry $18 million of assets.
From 1977 to 1990, Lynch earned an annualized return of 29%. Fidelity Magellan’s assets grew to $14 billion.
Lynch’s record with Magellan is truly one of the greatest investment runs in history.
Yet despite Lynch’s incredible 29% annualized returns…
The majority of people who invested in the Fidelity Magellan Fund lost money.
We Are Not Wired for Successful Investing
Fidelity Investments conducted a study of the Magellan Fund… What it found was disturbing.
While Lynch posted 29% per year returns, the average investor in his fund didn’t break even.
Instead, they fell victim to human nature.
After Lynch had a hot stretch of investing, people would pile cash into the fund.
Then, when Lynch’s returns leveled off for a while, those same investors pulled their cash and left.
Greed drove money into the fund at high points, and fear pulled money out of the fund at low points.
Natural human emotions drove the average investor in the Fidelity Magellan Fund to do exactly the wrong thing at the wrong time.
Instead of getting rich by investing with one of the greatest fund managers of all time, the average investor didn’t even turn a profit.
Lynch’s Most Valuable Advice
You can’t time the stock market.
In fact, study after study proves that you shouldn’t even try.
Some of the world’s best investors have tried and failed to identify the top of the markets… and have lost millions of dollars in the process.
But if you learn to embrace Peter Lynch’s most valuable piece of advice, you’ll never spend time worrying about a bear market again…
Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.
Great long-term investment results are achieved by the amount of time you spend in the market. The longer you invest, the better!
It is virtually impossible to successfully time the market. Trying to do so is an almost certain way to miss out on a significant percentage of your returns.
Remember, we have more than a century of data showing that over time, the stock market heads in one direction: up!
Yes, you will see bear markets. But those will end faster than you expect, and the market will recover and keep going higher.
In fact, in 2020, we had the shortest bear market in the history of American stocks.
Over the long term, the stock market is built to win. So stop sweating the short term and take the long view… It served Lynch incredibly well.