Skip to content
Get rebates
Famous Traders · Value

Peter Lynch

Peter Lynch / The Magellan Fund Manager Who Found Stocks at the Mall

A former golf caddie who became the most famous mutual fund manager of the 1980s. He believed ordinary people spot good ideas before Wall Street, if they’re willing to do their homework. On this page you can hold Magellan using its real annual returns, practise sorting stocks into Lynch’s 6 categories, and measure whether a price is too high for its growth.

Hold the Magellan fund ↓Sort stocks into 6 categories
About 14 min readUpdated 4 Oct 2026

Illustration: a notebook of stock ideas. The stock names are examples Lynch and the media have described. No openly licensed photo was found

Born1944
Magellan1977–1990
Return per year29.2%
Beat the S&P 50011/13 years
Magellan · 1977–198929.2%Compound annual return from the yearly figures, against about 14.6% for the S&P 500 with dividends
$10,000×28Held from the start of 1977 to the end of 1989, it would have grown to about $280,000
Fund assets$14BGrew from about $18 million, mostly from new money, not returns
01

ProfileQuick facts

NamePeter Lynch
Born19 January 1944 in Newton, Massachusetts, USA
EducationBachelor’s degree from Boston College in 1965, studying history, psychology and philosophy, and an MBA from Wharton in 1968
Career at FidelityIntern in 1966, full-time from 1969, director of research 1974–1977, and later vice chairman
The Magellan fundManaged from May 1977 to May 1990, averaging about 29.2% a year, with assets growing from about $18 million to $14 billion
StylePicking stocks one by one through homework, buying growth stocks at a reasonable price (GARP) and holding a large number of stocks. In 1989 the fund held about 1,400
BooksOne Up on Wall Street (1989), Beating the Street (1993) and Learn to Earn (1995), written with John Rothchild
TodayRetired from managing funds at 46. Still vice chairman of Fidelity and active in philanthropy through the Lynch Foundation
02

From caddie to MagellanFrom golf caddie to the most famous fund manager of his era

Lynch lost his father as a child and had to work as a caddie to help his family. At the golf course he listened to businessmen talk about stocks every day. The first stock he bought in college rose many times over and helped pay for his further studies

He joined Fidelity as an analyst and worked his way up to managing Magellan, then a small fund, in 1977, and retired at just 46. Tap each stage to follow his journey

FIELD NOTES · 1944–1995Lynch’s life notebook

1944 · Born on 19 January 1944 in Newton, Massachusetts, a suburb of Boston

1 / 14
CASE FILE · L’EGGSAn idea from a supermarket trolley
  1. 1SeeHis wife Carolyn bought Hanes’ L’eggs pantyhose at the supermarket and loved them
  2. 2AskWhy they sold so well. He found that people visit supermarkets far more often than clothing stores, so products sold there had an advantage
  3. 3CheckLook at the competition, how profitable the business is, and whether the stock is still not too expensive
  4. 4BuyHanes became one of Magellan’s big winners

Compiled from what Lynch said in a PBS Frontline interview and a Wharton Magazine article. The key lesson is not step 1 but steps 2 and 3

Lynch in Wharton Magazine

The person who turns over the most rocks wins the game

Paraphrased, not a direct quote
03

Magellan, year by yearLab: hold Magellan with its real annual returns

The figures below are Magellan’s real annual returns, compared with the S&P 500 including dividends. Choose the year you get in and out, or choose performance-chasing behaviour, holding only in years that follow a good year, and see what happens to your $10,000

Your behaviourPerformance chasing: hold the next year only if the fund returned 20% or more the year before, otherwise hold cash
Annual returns (%)
MagellanS&P 500Years your money was in the fund
Your 10,000—
If you held Magellan without selling—
If you held the S&P 500—
Years Magellan won—

Fund assets18 million → 14 billionGrew about 778 times
$1 held throughout1 → about 28Grew about 28 times

Almost all the difference is new money that investors poured in after the fund became famous. The later the money came in, the less of the growth it got

Magellan’s calendar-year returns from Wikipedia, and S&P 500 returns with dividends from Slickcharts. Lynch took over in May 1977 and left in May 1990, so the 1977 and 1990 figures include periods run by other managers. Sales charges, taxes and interest on cash are excluded

What this means for traders

Many investors buy into a fund after seeing good results and sell after a bad year, often missing the best years. Traders who change systems every time they hit a losing streak have the same problem. Judge a system on a large enough sample, not on the last few results

COST · COMPOUNDING

Small costs on every trade add up to a lump sum Trade gold, currencies or indices with XM through 1TRADER and get up to 90% of the IB commission on every lot

Open account ↗

1TRADER is a partner (IB) and earns a commission when you open an account through our link · % is the share of IB commission returned to you · How to get rebates

04

Six kinds of stockLab: sort stocks into Lynch’s 6 categories

In One Up on Wall Street, Lynch sorted stocks into 6 categories, because each category delivers returns differently and needs a different way of holding. Read the story of each hypothetical company one at a time, then pick the category you think fits

Company 1 / 8Correct: 0
Hypothetical company

—

—

Which category does this company belong to?

See the explanation of all 6 categories
  • Slow growerSlow GrowerProfit grows roughly in line with the economy. Bought mainly for dividends. Lynch didn’t hold many of these
  • StalwartStalwartLarge companies with profit growing about 10–12% a year. He usually aimed for a 30–50% gain and then sold, and used them to cushion the portfolio in bad markets
  • Fast growerFast GrowerCompanies with profit growing about 20–25% a year. The source of tenbaggers, but risky if they expand too fast or the price gets too high for the growth
  • CyclicalCyclicalProfit rises and falls with the economic cycle or commodity prices. Timing matters most; holding through the wrong part of the cycle can mean heavy losses, even for big companies
  • TurnaroundTurnaroundCompanies in trouble or close to collapse. If they survive, the price can rebound sharply. His favourite example was Chrysler
  • Asset playAsset PlayCompanies with assets the market overlooks, such as land, cash or subsidiaries worth more than the share price reflects

All the companies are hypothetical examples for practice. The category descriptions are compiled from One Up on Wall Street. A real company can move between categories over time; for example, a fast grower that grows large becomes a stalwart

What this means for traders

Gold, oil and currencies also behave differently in different periods. Sometimes they trend for a long time with interest rates; sometimes they swing in a range. Knowing which mode the market is in helps you choose the right trading approach and exit, instead of using one strategy for every situation

SPREAD · COSTDon’t let costs quietly eat your profitsTrade with XM through 1TRADER and get up to 90% of the IB commission on every lot
Get started ↗

1TRADER is a partner (IB) and earns a commission when you open an account through our link · % is the share of IB commission returned to you · How to get rebates

05

Growth at a reasonable priceLab: is this price too high for the growth?

Lynch liked growth stocks but refused to overpay. The method he described in his book compares the P/E with the earnings growth rate, and adds in the dividend too. Adjust the hypothetical company’s numbers and watch the gauge

(growth + dividend) ÷ P/E—
PEG = P/E ÷ growth—
by the book’s criteria—

Criteria from One Up on Wall Street: a (growth + dividend) ÷ P/E below 1 is unattractive, about 1.5 is okay, and 2 or more is what he looked for. With the commonly used PEG, a value of about 1 is considered a fair price. It is only a first screen, and depends on how reliable the growth figure you enter is

What this means for traders

Gold and currencies have no earnings to calculate a P/E, but the same question applies: is the price you pay reasonable for what you get? For example, if you buy after the price has already run a long way, you’ll need a wide stop loss, while the remaining profit may not be worth the risk

06

Cocktail party theoryLab: take the market’s temperature from the conversation

Lynch joked that he could read the market’s mood at cocktail parties, from how people talked to a fund manager. We compare each stage with today’s trading group chats. Tap each stage to see

At Lynch’s cocktail party

—

In today’s trading group chats

—

What it means

—

Compiled from One Up on Wall Street. The 15% and 30% figures are approximate numbers Lynch used in telling the story, not a market timing formula. He himself didn’t believe in timing the overall market; use this only as a reminder about crowd emotion

07

Fact checkFact check: truth and stories passed along

Lynch is one of the most quoted investors, and some figures have become distorted in the retelling. We sort each one by the weight of the evidence

1977–1990Supported

Magellan averaged about 29% a year

The annual returns for 1977–1989 compound to about 29.2% a year, matching the commonly cited figure. Some sources use 29.7%, depending on the period counted

1977–1990Common misconceptions

The fund grew from 18 million to 14 billion through investing skill

Assets grew about 778 times, but $1 held throughout grew about 28 times. The rest was new money that investors poured in once the fund became famous

1977–1989Supported

Beat the S&P 500 almost every year

It lost to the S&P 500 in only two full years, 1984 and 1987. In 1990, when he managed only the first part of the year, it also lagged slightly

Over the eraCommon misconceptions

Half of Magellan’s investors lost money

This has been widely repeated, but no original study has been found, and Fidelity denies ever saying it. What is documented is that the fund lost money over some 12-month periods. The lesson about chasing performance still holds, but this figure shouldn’t be quoted

1970sPartly true

Lynch bought Hanes because his wife liked L’eggs pantyhose

His wife Carolyn really did like the product, but that was only the starting point. He went on to study where it was sold, who bought it and what the competition was like before buying the stock

Over the eraCommon misconceptions

Invest in what you know means buying brands you like

Lynch stressed repeatedly that familiarity is only the source of an idea; you must go on to check the financial statements, debt, growth and price. He compared investing without homework to playing poker without looking at your cards

1987Supported

Lynch didn’t sell during Black Monday

The Christian Science Monitor reported that nearly all the fund’s lost value came from falling share prices, not selling, and he said in an interview that the fund stayed fully invested in both up and down markets

1982Partly true

The Chrysler profit came from buying when the company was nearly bankrupt

He bought in 1982, after the government had already guaranteed Chrysler’s loans, not when it was still unclear whether the company would survive. Good turnaround stocks are often bought after signs of survival

Over the eraSupported

Lynch made the word tenbagger famous

The word is borrowed from baseball and means a stock that rises tenfold. He used it in One Up on Wall Street until investors around the world adopted it

Every lot you trade with XM through 1TRADER earns cash back of up to 90% of the IB commission, lowering your costs over time

Open an account for cash back ↗

1TRADER is a partner (IB) and earns a commission when you open an account through our link · % is the share of IB commission returned to you · How to get rebates

08

LessonsLessons for Forex and gold traders

Your checklist
0/4
01

Explain your reasons in 2 minutes

Lynch advised telling the story of a stock you plan to buy in two minutes: why it will rise and what has to happen. Traders can do the same. If you can’t explain why you’re opening an order, don’t open it yet

Forex glossary →
02

Know what kind of thing you trade

Lynch sorted stocks into categories because each needs a different strategy. Gold and currencies are the same: sometimes they trend for a long time, sometimes they swing with the news cycle. Know the behaviour before choosing how to trade

03

Don’t waste time predicting the whole market

He believed trying to time the overall market costs investors more than it gains. Traders should plan what they’ll do if price goes a certain way, rather than guessing which way it will go

04

Being right 6 times out of 10 is enough

Lynch said being right 6 times out of 10 is doing well. What makes it work is letting the winners run and cutting the losers before they do much damage. Size your orders so each loss doesn’t hurt the account

09

Quiz5-question quiz

Question 1 / 5

Under Lynch, roughly what average annual return did Magellan make?

10

Know what you ownKnow what you hold, and why you hold it

What you can apply from Lynch is doing your homework before acting, knowing how the things you trade behave, and keeping each loss small. Here are tools on 1TRADER that can help

KnowledgeUnderstand the terms fullyYou can explain the reasons for an order more clearly once you understand how the market worksForex glossary →
REBATE · 1TRADER

Trade like a pro: control your costs

Open an account through 1TRADER and get cash back on every lot you trade, lowering your spread and commission costs over time.

How to get rebates, step by step →
XMGet the XM rebateExnessGet the Exness rebateHFMGet the HFM rebateCompareCompare brokers

Leveraged trading carries high risk. Study the broker’s terms and the risk disclosure before opening an account.

11

Further readingFurther reading

  • One Up on Wall StreetPeter Lynch and John Rothchild · 1989Lynch’s first book, explaining how to find ideas in everyday life, the 6 stock categories and doing homework before buying. It sold more than 1 million copies
  • Beating the StreetPeter Lynch and John Rothchild · 1993The story behind managing Magellan and how he picked stocks one by one, with the investing rules he summed up
Sources for this article
12

FAQFrequently asked questions

Who is Peter Lynch?

An American fund manager born in 1944 who managed Fidelity’s Magellan fund from 1977 to 1990, averaging about 29.2% a year, and wrote One Up on Wall Street

What does Invest in what you know mean?

Find investment ideas in what you see in everyday life or at work, before Wall Street notices. But Lynch stressed that you must always follow up with homework, including financial statements, debt and price, rather than buying because you like a product

What is a tenbagger?

A stock whose price rises 10 times from the purchase price. It’s a baseball term that Lynch used in his book until it became known worldwide

How is Lynch’s PEG ratio calculated?

The popular method divides the P/E by the earnings growth rate; a value of about 1 is considered a fair price. In One Up on Wall Street Lynch also used another version, (growth + dividend) ÷ P/E, where 2 or more is attractive

How can Forex and gold traders use Lynch’s ideas?

Explain the reasons for an order in two minutes, know how the things you trade behave, don’t try to predict the whole market, and keep each loss small, because being right 6 out of 10 times is enough

Share this articlePass it on to a fellow trader
f FacebookXX
Back to the hubAll famous tradersSee the list

Educational content, not investment advice. Return figures are publicly reported figures. The labs use models and hypothetical companies. · risk disclosure · Forex glossary