Peter Lynch discusses the issue with passive investing in this rare interview with Bloomberg (2021). Peter Lynch hasn’t given an interview in years, so when he finally gave an interview this past week, it got my full attention. In this interview, Lynch said that investors who only invest in passive index funds are quote “missing the boat” and are essentially preventing themselves from making more money If they are able to find a manager that can outperform the stock market
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41 Comments
I think Peter underestimated how unusual his own skill and talent was, and how difficult it would be for people to copy his method. As great as his books are, the vast majority of people will never be able to beat the market consistently year after year.
Any person that’s anti index fund , mutual funds, or etfs I’m a fan of. It’s not hard to pick one winning stock people. You over complicate it.
4:38 Warren doesn’t look like the guy who is going to live for another 40 years.
Man who spent his career picking stock for active mutual funds says indexing is bad 😮 no way
Not everyone has the time to rebalance etc etc. I'm a tradesmen and am currently on a project working 12 hour days for the next 3 months. I personally hold individuals in my TFSA that are growth and high div, IE: Enbridge, Telus, Barricks Gold, Canada Power Corp, Couche-Tarde, CNR (CN railway), Fortis, Manulife – and my ETFs are HCAL, HYLD, and HCA. however for my RRSP I just use VEQT and some VFV for extra U.S exposure. With that said, I absolutely love Peter Lynch. IMO it's the ones who cannot handle corrections and sell, whereas I actually double down during these times as everything is just on clearance essentially. Simple as that.
If your a small time investor like myself, it could be beneficial to increase your investment rather then chasing higher returns.
I can add 50% by working 2 or 3 hours a month rather then gaining 10% by busting my ass
Lynch was successful from 1977 to 1990. If he just avoided 1982, it was basically free money from there on out. All he had to do was buy Apple and Microsoft and his returns would be better than what they actually were. People like Lynch constantly claim to have some sort of knowledge that the rest of us don't, in reality he's just plain lucky. Warren Buffett made way more than Lynch and Buffet says just invest in index funds
This was from someone else that worked with Peter Lynch,
"I was fortunate to have worked at Fidelity when Peter was still there mentoring analysts and PMs.
I remember one day he came to speak to all of the analysts and the PMs. He came from an era before closet indexing – PMs hugging the benchmark to avoid getting fired and maximizing their own compensation while nearly guaranteeing investment mediocrity.
So he made a basic point – good ideas are rare, so when you find one you shouldn’t just slightly “overweight” it vs. the index – you should double or triple-weight it. There was an uncomfortable silence in the room with many PMs nervously fidgeting in their seats. I suspect most knew he was right, but most also new that doing so wouldn’t maximize their personal incentives (or at least that was my perception)."
So I guess if we want to cut out the human element of portfolio managers not being incentivized, it's straight to index funds. Sigh, I wish I could find my own Magellan or Medallion fund. Would be nice.
I would like for Peter Lynch to comment on my returns which are over 30% a year. Granted I do not have a multi-million-dollar portfolio like he managed.
Enjoyed the video! Thanks for taking the time make it!
Passive management is the smart money. Invest for the long hall.
Passive investing is not dangerous because of the missed 2-3% CAGR you mentioned but because it inflates stock prices in the indices based on metrics other than value.
This is very helpful and inspiring
Pick any one of the FANG stocks and put all your money there, i bet you will gain 5-20x more in 40 years than putting your money in Index Fund
Dont get me wrong, i have all direct stocks, actively managed fund and index fund in my portfolio for the past 8 years, and guess what? yes my individual stocks are 10x more gains than both funds, and my actively managed fund are beating my index fund by slight 40% for the past 8 years.
Do your own maths and decide
I use an index fund in my retirement account for three reasons: 1. I don't have illegal access to inside trading information like Peter Lynch and his buddies do; 2. I'm not allowed to actively trade in that investment account; 3. I've always gotten a return that far outpaced inflation and allowed my fund to grow, although I didn't get the triple-digit returns that greedy people like Lynch demand.
Index fund and mutual funds are scam. Did you watch wolf of the wallstreet? If you watch it then you understand.
Picking active managers that beat the market (ahead of time) is nearly impossible to do on a consistent basis – as you nicely point out at 5:50
These videos are always showing what you could GET, never what you could LOSE. These videos don't educate, they're there for entertainment and to line the pockets of the video uploader each time someone watches these dumb videos.
To be fair to your example you should ask which managed fund outperformed the market for 40 years. I would guess the rate is practically 0.
The most likely explanation is not that managers are focusing on short term, but that it just random if they outperform or not. The longer you roll the dice the more the true base probability emerges. And that base probability is that the advantage of managing doesn’t cover the cost.
The real problem I see about people going to Index Funds is: they want low risk. In the eventual case of a huge correction, this means probably loads of them pulling money out, as they probably are scared of losing more, which further increases the price drop and prolongates the move of money out of the market. Of course, anyone with no financial knowledge will do the same, wether the money is at an index fund or not. But it seems like people have figured out with this index funds they can expect decent returns with 0 risk, almost as bonds, when that's not the case. And it feels that they will be scared af when they see red on the accounts
Do you have a Roth IRA
2:32 and you haven't gotten to the point of analyzing Peters's comments. I know the difference between index and actively managed funds. Couldn't that be a separate video…?
Money locked up in funds gives active investors and traders more opportunities for profits 💃🏽
Finding an investor and cloning his portfolio every quarter is the best way. Backtracking buffet this actually outperformed buffet by 0,5% cant remember the numbers for certain but annual return was around 20-25% which is just bizarre
ew. terrible video
terrible channel
Getting ''average returns'' is above average. I like Lynch well enough, but demonstrably the vast majority of people, including professional investors, would do better buying index funds.
Why would you, having demonstrated the superiority of indexing, only index half your portfolio? You’ve just demonstrated that stock picking doesn’t work compared to indexing, so it’s irrational to then devote half your portfolio to stock picking. It’s like, this works and this doesn’t work, so we’ll put half the portfolio in what works and half in what doesn’t work. Really?
Click bait
This video, whilst not incorrect, doesn’t point out 1 REALLY NB fact – that your chances (if 85% under perform) is near zero in a year, but take an 85% chance EVERY YEAR for a long time and it’s an impossibility – especially including fees!
If you watch his other old videos, he said that if you bought nothing from a stock you will lose nothing, so quit worry about what you lost potentially. Kind conflicting here
John Bogle is my hero. Not Peter Lynch. Index funds are number 1. Rip off actively managed mutual funds are big fat zero's.
Aren’t the fund performance returns calculated after the fund fees?
Was peter Lynch a great fund manager, or did he just get lucky?
But where is the interview with Peter Lynch 2021?? I only did hear the female voice trying to be smart…
Could you also make a video on whether SIP or lumpsum investments should be incorporated in our investing strategy for long term??
At least 75% of active managers do not beat the S and P 500 index. Good luck trying to find one that does. I would rather put my money in the index knowing I'll beat the majority of professional investors.
Cali from the Valley said nothing, but nice touch using Lynch's name!
Fund managers have several disadvantages that make it almost impossible for them to outperform the market in the long term. But as a private investor, the chances of beating the market are significantly better.
The title of this video is terribly misleading. I expected to see and hear Mr. Lynch but all I got was an Investing 101 PowerPoint presentation.