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Q&A: YES, PETER LYNCH DOES HAVE A FEW TIPS FOR YOUNow that he's rubbing elbows with Lily Tomlin and Don Rickles on the small screen in Fidelity Investments' latest ad campaign, Peter Lynch can give up any hope of fading away like some old soldier of the mutual-fund wars. As manager of Fidelity's Magellan Fund from May, 1977, to May, 1990, Lynch's stellar stock-picking built the fund from $20 million to $14 billion. The legacy of that record is high credibility, which he's using not just to help Fidelity, whose board of trustees he sits on, but also for a broader drive against what he calls "financial illiteracy." Business Week's Robert Barker caught up with Lynch by phone one recent morning while he prepared in a San Francisco hotel room for a marketing appearance. Excerpts of their discussion follow.
Q: What's the mood of individual investors you're meeting with?
Q: Is that right?
Q: What should individual investors properly be worrying about? Twenty years ago or even 10 years ago, you didn't have to worry about this stuff. You'd retire. You'd get 50% of your last year's salary the rest of your life, or 60%, and your spouse would get it. I mean, you didn't have to care whether the bond market went up or the stock market went up. That was the responsibility of the company. Now, not only do a lot of companies not have pension plans but sometimes you have these horror stories where somebody gets early retirement and they say, "O.K., lady; O.K., buddy, here's $150,000. Here's $300,000. It's yours." People have lost this money. They've lost it!
Q: With all the bad news right now, did individuals bail out at a market bottom? There's always something to worry about. In the 1950s there was something to worry about. People worried about another depression. They worried about building fallout shelters. I remember people worried a while ago about oil going from $4 to $40 a barrel. And the experts said it's going to go to $100, and we're going to have a depression. And then in four years, oil went back to $12, and the experts said it was going to go to $4, and we're going to have a depression. And then we had the commercial-banking crisis and the savings-and-loan crisis. And remember when Japan was going to own the world eight or nine years ago, and they weren't going to buy our bonds, and we were going to have a depression? Now everybody's worried that Japan's going to have a depression, and then we're going to have a depression. I can't imagine we're not going to have a period of time when there's no bad news around.
Q: Are all these external events things that individual investors should ignore?
Q: What lessons, then, should individual investors take from the market action over the past three months? I had somebody call me a little over a year ago. He said, we've saved money, my wife and I. Our whole life we put our kids through college, and now we have a mortgage on our house, but we can handle that. And our daughter's getting married next November. And we've saved enough money for that. We're going to go to this wedding that's coming up this November...and he said, "Could you give me one of those funds at Fidelity for the next year, one of those ones that goes up about 30%, 35% a year? I don't want to go for a real aggressive product, you know." And I said to him, "Well, listen, what are you going to do if the market goes down in the next year? Are you going to get rid of the band? Have a cash bar? And maybe you don't have a church?" I mean this person was willing to put his money in a stock fund for 12 months. That's absurd.
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Updated Oct. 29, 1998 by bwwebmaster
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