Peter Lynch (Net worth $352 million-2006)
Who is Peter Lynch? Peter lynch was a fund manager of Fidelity’s Magellan Fund. He ran this mutual fund for nearly thirteen years. During this period (1977 to 1990), the mutual fund gave annualized return of 29.2% per annum. At the age of forty six years, Peter Lynch retired from Fidelity’s. Peter lynch grew during 1950’s.
In United States that was a great period for stock market. In 1955, when Peter Lynch was 11 years of age, he first got exposure to stock market. In that age Peter Lynch worked as a attendant to corporate golfers. These people were all well paid highly successful people. While playing golf they used to share their experience of stock market.
The names of stocks that Peter Lynch heard from the golfers made no meaning to him. He used to go back home and used to search for them in newspapers. He used to feel excited seeing the price of these particular stocks going up in times to come.
Peter Lynch first stocks were bought when he was in college. He bought stocks of a freight carrier company called Flying Tiger. After he bought this stock, it price went up several folds. In 1960’s Vietnam war was in full flow. During those times Flying Tiger planes were used to carry soldiers. The appreciation of Flying Tiger’s stocks was phenomenal.
This gave a huge personal boost to Peter Lynch. It framed Peter Lynch’s first steps to become a stock market guru.
Peter Lynch first coined the word ‘Ten Bagger Stocks’. When the market price grows to ten times the purchased price, the term was used. Peter Lynch believed that in order to get successful in market one need only few ten bagger stocks. For sure in a lifetime one will not find many Ten Bagger stocks. Peter used to focus on buying mostly Ten Bagger stocks. For sure, not every stocks he bought used to perform big but those Ten Baggers used to compensate. Peter Lynch says it is not that ten bagger stocks are to few. In fact he believes that there are many listed in stocks exchange. Only if we get hold of couple of them we can be a winner. Peter Lynch says, while investing money, even if you are right 6 times out of 10 you will be considered excellent. So not all times you selected stocks will perform. It is only those few ten baggers that will compensate for the mistake. A calculated risk is what investors shall take while investing. Peter Lynch believes that timing is important in stock market investments. Lot of people go in and go out from market in wrong times.
In Middle of 1960’s Peter Lynch joined Fidelity. In those days he was paid $1300 per month. In his second year in Fidelity he was paid $1400 per month. Peter Lynch used to work as Market Analyst. He was just 25 years of age when he joined Fidelity. By his age Peter Lynch was earning quite well. After around 8 years of working in Fidelity that Peter Lynch got Magellan Fund. He was almost 33 years of age and still quite young to be a fund manager. When Peter Lynch took over Magellan in 1977 its asset value was close to $20 million. Magellan Fund was basically a growth fund which was mostly investing in domestic market. While managing Magellan Fund, Peter Lynch’s philosophy was clear. He used to research his stocks on his own. He used to research many stocks and picks the top 10%. Idea was to select good stocks which have great future prospects. When Peter Lynch bought Taco Bell who knew about this small restaurant chain?
Peter Lynch accumulated some quality stocks in Magellan’s Portfolio. As a result by 1983 Magellan’s asset value was close to $1 billion.
In early 1980’s Mutual Funds were not as popular as today. Today, television news channels have dedicated reporters who focus only on mutual funds. Mutual Fund was not such a big hit back then. It was only stocks-stocks that people, print media, TV used to talk about. The situation changed when people were forced to think about their future. Till then government used to take the burden of Pension of retired people. People used to retire with a comfort that government will take care of them. But things changed when people started needing more money. Government dependency also became less. People started gaining more financial literacy. It was after then that mutual fund industry saw dramatic growth. With Fund Managers like Peter Lynch present to prove the worth of Funds, there was no looking back.
There was a market crash in 1987. Peter Lynch was still in Magellan at that time. He said that he was well prepared for the crash of 1987. During the market crash of 1987, Peter Lynch took a long vacation. This is a lesson for small investors. There is a way to deal stock market crash. Getting panic and selling all holdings is the last think one shall do. In 1987 within weeks or ten days market crashed more than 500 points. Magellan Fund asset value became one third after the crash. But Peter Lynch says “I wasn’t that scary because I concentrate on fundamentals”. Peter Lynch used to invest in companies by looking at their balance sheets and profit and loss accounts. He says “. I look at their business. I look at the environment” before buying their stocks.
Peter Lynch believes that a small investor is as strong as a pro. The only thing that small investors fail to do is stock research. They do extensive research while buying house, furniture, car etc. But they buy stocks blindly on advice of others. Buying stocks of company which has decreasing sales and earnings is a mistake of investor. One cannot put blame on the market for this mistake. Peter Lynch says that a common man can do three things; One they can avoid stocks all together. They can buy stocks directly or they can buy them through mutual funds. What Peter suggests for small investors to select mutual fund as their preferred investment vehicle. In parallel, one can invest directly in stocks. Everyone is acquainted with at least four or five companies. Better is to keep tracking these few companies regularly, and when opportunity comes buy their stocks.
Warren Buffett (Net worth $58.5 billion)
His full name is Warren Edward Buffett. He is a Virgo born on 30-Aug-1930. He is an American presently working as a CEO of Berkshire Hathaway. He was not a founder of Berkshire Hathaway instead in year 1962 he began buying shares of this company and soon bought enough shares to gain administrative control over it. Now Berkshire Hathaway has major business focused on Insurance sector. Warren Buffett went to study business administration in Columbia Business School where Warren Buffett and David Dodd worked as a faculty. In 1951 he graduated with MS in economics. Buffett was very influenced by Benjamin Graham and later by Philip Fisher. He once told to newspapers that he was 85% Benjamin Graham and 15% Philip Fisher. Later he also made friendship with Charlie Munger who still works with Bufett in the board of Berkshire Hathaway. The principles of investing of Warren Buffett was very simple, Use market Fluctuation to your advantage, because market fluctuations makes price of good stocks as undervalued (time to buy, margin of safety) and also makes it overvalued (time to sell)
John Bogle (Net worth $80 million)
His full name is John Clifton Bogle. He is a Taurus born on 08-May-1929. He is an American and has retired as CEO of Vanguard Group. His investment strategy includes investing in index funds. He has always advocated on investing in index funds over and above actively managed mutual funds. He believed that an index fund can beat any mutual funds over a long period of time. He has laid down below some very basic rules of investing which are driven more by common sense than any trick:
- Invest in any index fund which charges minimum fees
- Investing in too many mutual funds is not right. If objective is diversification then select the sector funds carefully.
- Make your portfolio a well diversified one and hold it for long term.
Julian Robertson (Net worth $3.1 billion)
Julien Robertson is an American and was born in North Carolina. Tiger Management Corporation was founded and later managed by Julian Robertson. Tiger Management Coprporation gave birth to world largest and most successful hedge funds ever. From 1980 to 1998, the Tiger funds managed by Julian Robertson returned 32% per annum of net performance. This is exceptional when you compare this performance with average market return of 12% over this period. A very important of saying of Julien Robertson speaks about the simplified this man had with him and we quote “our mandate is to find the 200 best companies in the world and invest in them, and find the 200 worst companies in the world and go short on them. If the 200 best don’t do better than the 200 worst, you should probably be in another business”.
George Soros (Net Worth $22 Billion)
George Soros: investor of Hungarian origin was born in 1930, a survivor of Nazism, Obama supporter and Democrat and major philanthropist, Soros is known for the unparalleled success of its fund Investment: Quantum Fund. Hedge fund guru George Soros has in fact created one of the best in the world on its investments: a sum of 1,000 USD invested in 1969 in the creation of Quantum Fund has acquired a $ 4 million in 2000, representing annual profits by 32%.
His investment philosophy includes his general theory of investment is that financial markets are irrational. The prices of stocks, bonds and currencies depend on the reactions of human beings who buy and sell, traders often react emotionally rather than rationally. Opportunities can be found by analyzing in depth the value of assets and capitalization. George Soros is focused on the theory of reflexivity, which is based on the following hypothesis: the perception of each investor individually has an impact on financial markets and the economy
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