Hope, need and greed

In the history of fund management, the name of Fidelity Magellan’s Peter Lynch still carries a lot of weight. Lynch is considered by many to be the greatest mutual fund manager of all time. (Warren Buffett, for example, just to get technical about it, is a businessman managing a diversified holding company.) But is Lynch’s reputation all it’s cracked up to be ? Spencer Jakab:

 

During his tenure Lynch trounced the market overall and beat it in most years, racking up a 29 percent annualized return. But Lynch himself pointed out a fly in the ointment. He calculated that the average investor in his fund made only around 7 percent during the same period. When he would have a setback, for example, the money would flow out of the fund through redemptions. Then when he got back on track it would flow back in, having missed the recovery.

 

Source: Peter Lynch’s Track Record Revisited

 

Not that the fund manager should be found guilty for the sins of his investors. But the point stands, nevertheless. Unless you had either unnatural luck or superhuman patience or market timing, you never enjoyed the returns cited by Fidelity’s Magellan fund.

Hope, need and greed