Peter Lynch Success Story- The Tale of an All-Time Great Investor
You must have heard numerous success and failure stories of many great investors who earned magnificent returns throughout their life. So to add to your knowledge about those incredible investors, we are presenting the success journey of all-time great investor Mr Peter Lynch.
Peter Lynch is a famous capitalist and fund manager. At present, Peter Lynch net worth is $450 million. He averaged an extraordinary annual return of 29.2% in the history of Mutual Funds. Since retirement, he is involved in extending his knowledge on investment strategies and philanthropic activities. He is well known for his skills in managing the Magellan Fund and providing the investors with the highest returns.
Early Life of Peter Lynch
He was born on January 19, 1944, in the US. Peter's father died due to cancer when Peter was just 10 years old. After the death of his father, the condition of his family was not good. So to support her mother in earning for the family, he started working as a caddy in some golf club. Working as a caddy proved to be of great significance in his life, as his interest in the stock market developed by overhearing the conversations of great investors who came to play golf there.
His first investment was in the Air Cargo industry. Later on, when he was pursuing his graduation from Boston College, he used to save money. Out of the saved money, he purchased 100 shares of Flying Tiger Airlines. Since this stock was rising at a high pace in the market, it gave high returns to him. Peter used those returns to pay the fees of his college. He completed his graduation in the year of 1965. He also completed his Masters in Business Administration from the University of Pennsylvania in 1968.
From Fidelity Intern to Fidelity Fund Manager
After he completed his graduation in 1966, he was hired as an intern at Fidelity Investments. He also went to serve in the army for a period of two years from 1967 to 1969. Later, when he came, he was hired at a full-time job in Fidelity at a post of Textiles and Metals investment analyst. He also got a promotion to the post of Director of Research in 1974.
After serving for three years as director of research, finally, he was made the Fund Manager of Magellan Fund in 1977. This fund mostly held domestic investments. The day peter took over this fund, it was having total investments of $18 million, and 13 years later, when Peter resigned from that post and company, the fund held investments of approx. $14 billion. This is the 13 years of his career where he averaged an annual return of 29.2%, which is marked in the history of mutual funds. He retired at the age of 46.
Investment Philosophy of Peter Lynch
Peter Lynch investment strategy is known to the whole world that how excellent it was and still is.
The most important philosophy, as per Peter Lynch, is “Invest in what you know." It is a fact that everyone has good knowledge of their own work, and they can easily understand the financial and non-financial performance of companies involved in business related to their work. So, he advised many people that investment should be made in those sectors in which you are regularly engrossed. Also, he suggested investing in companies that are manufacturing or retailing the products we use in our day to day life. He also believes in investing for the long term.
PEG Ratio By Peter Lynch
As per Peter Lynch, the price-earnings ratio was not enough to judge the growth of any company. Though it is a myth in the market that companies with lower price-earnings ratios are right for investing, he believed the fact that only this factor does not define the true picture of the firm. So he formulated a Price to Earnings to Growth Ratio. This was a basic formula that divided the price-earnings ratio of the company with the growth rate of the firm.
According to him, those companies which were having a lower growth rate than their price-earnings ratio were undervalued in the market and vice versa. He started exploring these undervalued companies and invested in them. Till the company remained in its growth phase, the money was kept invested by him in them. Once they reach their apex, he sold the shares and invested in other growing companies.
The price to earnings to growth ratio is also used by modern fund managers to determine a firm's growth potential and the price of that company based on the growth.
Post Retirement Life
He retired at the age of 46 from that company, where he served for 17 years. After retirement, he became a philanthropist. He donated $10 million to the college from where he graduated. Peter Lynch started a Lynch Foundation for education and hospital initiatives. A lot of his earnings go to charity and donations. He has the vision to spread his knowledge on investing to as many people as he could in his life.
He is the author of three best-selling books known as, One up on Wall Street (1989), Beating the Street (1993), and Learn to Earn (1995). He has shared his investment experiences and learnings in these books.
You might be also interested in reading about Rakesh Jhunjhunwala: The Warren Buffett of India.
Also, read the success story of Vijay Kedia- one of the most successful investors in India.
This is the journey of a 10 years old boy who worked as a caddy to a rich man whose present net worth is more than $400 million. Investment is a powerful tool that could help you to become a millionaire, but it requires patience and a lot of research. If you will master the art of analysis and research along with understanding the time value of money, there is nothing that could restrict you from becoming a good investor.
We hope you gained knowledge about a great personality through our efforts to provide you with his life journey.
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