Peter Lynch Gives Advice on Investing

Prominent Financial Analyst Peter Lynch spoke about his investing principles and personal experiences to a packed room in Emerson yesterday.

Throughout his talk, Lynch, author of the best-seller One Up On Wall Street, emphasized that investors should make sure to understand the company’s background “story”.

“Before you invest, you should write down three reasons why you’re buying stock,” he said. “The fact that it’s going up doesn’t count.”

Lynch gained prominence in his years as the head of Fidelity Investments’ Magellan Fund. In his 13 years managing the fund, its assets grew from $20 million to $14 billion—approximately a 29 percent annual return.

Anthony J. Genello ’08, the president of the Harvard Financial Analysts Club (HFAC), described Lynch as an inspiration to students learning about finance and investing.

“Mr. Lynch is to investors representative of the idea that it is possible to beat the market,” he said. “Being so successful, all Harvard student investors look up to him. Most of the financial education we get is through student investing groups, and as limited as that is we still feel we can do very well by applying his techniques.”

The event, chaired by HFAC, marks the first time that all six student financial groups on campus have joined together.

One of Lynch’s key suggestions was that investors need to know exactly why a stock will perform well.

He compared the incomprehensibility of many new technology companies and products to companies with simple stories, such as his personal—and wildly successful—investments in Dunkin Donuts and Stop & Shop. Lynch said that investors should be able to explain to a 10 year old why they are investing in a company.

Lynch also pointed out that an investor only needs one or two good stocks a decade to be successful. He gave the example of a man who invested $1000 a year in two local companies, Friendly’s and Tampax, and ended up making $20 million.

Students said Lynch was a conversational and funny speaker, admiring his use of personal anecdotes and specific examples to illustrate his points.

“I read his book and liked it, and I thought it was a concise and entertaining summary of it,” said Alfredo O. Ramirez ’09.

“It was a pleasure to see him and hear his own insights and experience, and to be able to take it away from a text and get his personal touch,” he added.