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About
50 years ago, Edward Johnson founded a small financial
company called Fidelity.
Slowly growing in popularity throughout the 1950s and
1960s, Fidelity
started to gain a reputation as a great mutual fund company.
In 1969, Fidelity
stood at the top of the mutual fund industry. Unfortunately,
the 1973/1974 bear market and ensuing energy crisis took
a toll on investors. By 1975, Fidelity,
along with many other mutual fund companies, went into
financial hibernation. However, when the long financial
winter was over, two of the greatest investment stories
of all time emerged.
Peter
Lynch started managing the still unknown Top
Fidelity Magellan Mutual Fund in 1977. Quietly, Peter Lynch starting making
Fidelity and the Fidelity Magellan Fund household words.
When he retired from Fidelity in 1990, Peter Lynch left
an investing record that is still unbeaten by any other
mutual fund manager to this day. Over 13 years,
Peter Lynch achieved a 29 percent average annual return
for Fidelity Magellan Mutual Fund investors. Ten
thousand dollars invested in the Fidelity Magellan mutual
fund in 1977 was worth almost $300,000 in 1990.
Capitalizing
on the success of Peter Lynch and on a new investing concept
introduced in 1980, the 401k plan, Fidelity’s popularity
grew rapidly. The Fidelity 401k plan quickly became
the industry standard. In fact, throughout the 1980s
and 1990s, the Fidelity 401k plan became virtually synonymous
with retirement planning.
However,
behind the scenes cracks started forming in the mutual
fund industry. After Peter Lynch left Fidelity,
he emphasized that simple investing approaches that could
be used by anyone led to his success as the Fidelity Magellan
Mutual Fund Manager. A debate started to emerge.
Should investors make their own financial decisions or
rely entirely on mutual funds? A quote from his
1993 book, Beating the Street, revealed Peter Lynch’s
attitude towards the mutual fund industry and his fellow
financial professionals:
"I've
said before, that an amateur who devotes a small amount
of study to companies in an industry he or she knows
something about can outperform 95 percent of the paid
experts who manage the mutual funds, plus have fun doing
it."
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Peter
Lynch, Former Manager, Fidelity Magellan Mutual Fund
The simple
wisdom of Peter Lynch should convince any investor that
they can succeed on their own.
Rogue
Investor is not affiliated with or endorsed by Fidelity
Investments, Peter Lynch or the Fidelity Magellan Fund,
but we are big fans. Fidelity Investments and the
Fidelity Magellan Fund are registered trademarks.
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