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Quote of the Day
“What’s the best way to invest $1 million? Tip one: Don’t buy stocks on tips alone. If your only reason for buying a stock is that an expert likes it, then what you really need is paid financial help.”
-Peter Lynch, in an article for Worth Magazine in 1996.
January 19th – This Day in Stock Market History
January 19th, 1944 – Peter Lynch, who would become one of the most successful mutual fund managers in history, is born.
Lynch’s track record as manager of the Fidelity Magellan fund is truly outstanding. Here’s a quick rundown of his numbers:
- Lynch began managing Fidelity’s Magellan Fund in 1977 and retired in 1990.
- Over those 13 years, the fund averaged a 29.2% annual return.
- The Fidelity Magellan Fund beat the S&P 500 in 11 out of the 13 years he ran the fund – The best record of any mutual fund in the world over that time.
- The assets under management of the fund went from $18 million to just over $14 billion under his tenure.
Lynch’s investment philosophy is laid out in his 3 books:
One Up On Wall Street: How To Use What You Already Know To Make Money In The Market This is his best known book, it lays out the “theory” behind his investment philosophy.
Beating the Street His second book, which speaks a little more to the application of his investment philosophy.
Learn to Earn: A Beginner’s Guide to the Basics of Investing and Business His third book, which is geared a bit more to beginning investors.
Lynch is best known for his idea of “buy what you know”. He would say that amateur investors have a big edge over Wall Street because they have a perspective that Wall Street does not have. Individual mom and pop investors will see brands popping up and becoming popular well before Wall Street will. Lynch was a supporter of starting your search for the next great investment by simply looking around you. What companies, stores, or brands have influence?
January 18th, 2000 – Shares of Yahoo Japan, traded OTC (over the counter) on the Japanese market, hit ¥100 million Yen per share (equal to about $947,800 U.S. dollars at the time).
Although shares of Yahoo traded on U.S. exchanges peaked on January 2nd, 2000, Yahoo Japan would keep rising for several more days.
One reason for the delay may have been Japan’s more strict trading rules, which had halted trading in Yahoo Japan the previous 6 days. At the time, shares were limited to a 2 million yen per share rise each day.
Best January 19th in Dow Jones Industrial Average History
1934 – Up 2.23%, 2.30 points.
Worst January 19th in Dow Jones Industrial Average History
1910 – Down 1.67%, 1.15 points.
Read of the Day
Peter Lynch also said: “If you can’t understand the balance sheet, you probably shouldn’t own it.”
We have a ton of information to help beginning investors understand how to read company financial statements. We have 3 in depth guides on the balance sheet, income statement, and cash flow statement, which should be a good starting points. You can check them out here:
Evaluating Financial Statements – The Balance Sheet
Evaluating Financial Statements – The Income Statement
Evaluating Financial Statements – The Cash Flow Statement
Also, here’s a link to one other Worth article that Lynch wrote. Most are not online to my knowledge:
Fear of Crashing (September 1995)
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Go to Next Day: January 20th, 2016 – The Dow falls 565 points, leading to the worst start of a year in stock market history. –>