Peter Lynch's Market Advice: 'If You Have Lot of Stocks, Some Will Do Mediocre, Some Will Do Okay,' If One or Two 'Go Up Big Time, You Produce a Fabulous Result'

Renowned investor Peter Lynch once opened up about his early experiences in the stock market, his initial investment, and the philosophy that guided his successful investing career.

What Happened: Lynch, who is famous for his successful stint at Fidelity’s Magellan Fund, traced his interest in the stock market back to his childhood in the 1950s. His curiosity was piqued while working as a caddie at a golf club in West Newton, where he would often overhear corporate executives discussing stocks.

While studying at Boston College on a caddie scholarship, Lynch made his first investment in Flying Tiger, an air freight company.

Convinced of the future of air cargo, he invested $1,000. The stock’s value soared during the Vietnam War as the company was involved in transporting troops, giving Lynch his first “ten bagger” – a term he coined for a stock that returns ten times the investment.

Lynch’s investment philosophy underscores the importance of letting successful stocks run. He believes that a few “ten baggers” can compensate for mediocre or poorly performing stocks in an investor’s portfolio. In Lynch’s words, “You have to let the big ones make up for your mistakes.”

Also Read: Peter Lynch’s Market Observation: ‘Far More Money Has Been Lost By Investors Preparing For Corrections, Than Has Been Lost In Corrections Themselves’

“The secret is if you have a lot of stocks, some will do mediocre, some will do okay, and if one of two of them go up big time, you produce a fabulous result. And I think that’s the promise to some people. Some stocks go up 20-30 percent and they get rid of it and they hold onto the dogs. And it’s sort of like watering the weeds and cutting out the flowers. You want to let the winners run. When the fun ones get better, add to them, and that one winner, you basically see a few stocks in your lifetime, that’s all you need,” Lynch said during an interview.

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Despite missing out on several stocks that increased ten-fold during his tenure at Magellan, Lynch’s approach proved to be successful. He reiterated that in investing, being right six times out of ten is considered good, and emphasized the importance of taking calculated risks.

Why It Matters: Lynch’s journey from a caddie to a celebrated investor highlights the importance of curiosity, calculated risk-taking, and patience in successful investing.

His philosophy of letting successful stocks run and allowing “ten baggers” to make up for less successful investments offers valuable insights for both novice and experienced investors.

His story serves as a reminder that success in investing doesn’t always come from being right all the time, but from being right enough times and letting those successes run.

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