1987 Magellan Fund Reminder: Your Advantage Over The Professional Investors

During the third week of October in 1987 when stock prices declined by over 30% in two days, Peter Lynch (the legendary mutual fund manager that generated 29% annual returns over a thirteen-year stretch) learned that the Magellan Fund had lost $2 billion (about 20% of the fund’s assets under management) and had to deal with a rush of redemptions on the fund. Even though Lynch was the best mutual fund manager in his day, and even though his Magellan Fund owned a mixture of the highest quality and fastest growing companies in the world (a total of over 1,000 of them!), he still had to deal with so many redemptions that he had to strategically sell off some of his stocks (for the record, Lynch sold off most of the Magellan Fund’s British holdings because the British stocks had not gotten hit as badly as the American counterparts).

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