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Financial Genius-Are you one? Peter Lynch is!

Posted 12 years ago

Financial Genius – Peter Lynch

Our topic here is financial genius. That is, the ability to make money, keep the money that’s been made, and make even more money — especially when others are losing. Is financial genius a category that belongs alongside the visionary genius of an Einstein or the leadership genius of a Lincoln? Is being a successful businessperson as significant an accomplishment as being an artist like daVinci or a statesman and communicator like Winston Churchill? Perhaps we have to conclude that financial genius, the genius of making money, may be a more ambiguous category than some of the others we’ve looked at — but there certainly some strong arguments for taking it very seriously. One definition of genius, after all, is the ability to do easily something that others find difficult. Making money is not something that comes easily to most people. And making a lot of money does not come to many people at all. Our financial genius is Peter Lynch, who built the Magellan Fund into the world’s largest mutual fund — an investment vehicle that made millionaires out of thousands of people. When Fortune magazine named Peter Lynch to their Business Hall of Fame, his induction was accompanied by this statement: “It is not for business people to amass great wealth. It is not enough to lead great enterprises. They must have changed the world around them for the better.” This is an important principle that ought to be included in any definition of financial genius. Look at Peter Lynch’s credentials: he’s the most successful money manager in history. In 13 years, he built Fidelity Magellan from a tiny institution with assets of 20 million dollars into the world’s biggest mutual fund, worth more than 13 billion dollars. From 1977 to 1990, Lynch gave investors a total return of 2,800 percent. When he retired in 1990, at the age of 46, he had outperformed every other mutual fund manager for 13 years straight. That’s a record that will probably never be matched. Peter Lynch’s connection to the financial markets had always been linked to domestic and family concerns. His father was a mathematics professor at Boston College who died when Lynch was 10 years old. To help earn money for his family, Lynch started caddying at a golf course near his home at age 11. Most of the talk he heard from the golfers was about the stock market. Lynch eventually got a scholarship to Boston College that was especially earmarked for former caddies. It happened also that one of his regular golfers was the president of Fidelity funds, and he suggested that Lynch apply for a summer job during college. That was the start of something very big for Lynch, Fidelity and its investors. The remarkable thing is Peter Lynch had no magic formula for financial success. He relied on intuition, trend spotting, and careful investigation of the companies his fund would invest in. His success was grounded in the fundamentals. He personally visited every one of those companies before committing a single dollar. Our topic in this session deals with something that directly concerns all of us — money. It’s valuable and important to connect with the power of visionary genius or with the creative energies that you may have ignored. But very few of us ignore money. All of us have got financial obligations, as well as hopes and dreams for financial success. Because of all these realities, I want to end this session with some attention to what we might call the opposite of financial genius. It’s not really lack of intelligence or clear thinking, but it’s a tendency that has led millions of people into a cleverly constructed money trap. I’m referring to the problem of debt, especially so-called unsecured debt or consumer debt or credit card debt. There’s certainly a good chance that this is not an issue in your life — but if it is, it needs to be addressed before the opportunities of financial genius can really open up. And there’s no doubt that it is a big issue for a lot of people. On an individual level, credit spending may seem to be analogous to deficit spending by the government. Both, after all, involve going into debt and paying interest to service that debt. There’s no doubt about it — this is the opposite of financial genius. So as a first step toward financial genius, take action to reduce the level of debt in your life, and to keep it from going back up. Then follow the example of Peter Lynch — in both financial and personal terms.  Don’t look for magic formulas. Build you career in the same way you build your investments: by emphasizing the fundamentals, by paying attention to what’s selling and what’s not selling in the world around you — and most importantly, by not letting financial issues distract your focus on other areas of your life. That distraction can occur when there’s not enough money, when there’s too much money, or when debt becomes overwhelming. In short, a financial genius knows the importance of money, and neither minimizes that importance nor magnifies it. As Peter Lynch has said, “Over time, there are going to be recessions, stock market declines, and layoffs. If you go to Minnesota in January, you know it’s gonna be cold. But you don’t panic when the thermometer falls below zero — because spring always comes.”