More famous than Warren Buffett in decades past, Peter Lynch of Fidelity says it’s still all about investing in what you know

“If you don’t understand what you own, you’re toast.”

So says Peter Lynch, who made it his mantra while successfully managing Fidelity Investment’s Magellan Fund FMAGX between 1977 and 1990, averaging a 29.2% annual return and consistently outperforming the S&P 500 SPX. Lynch retired as manager at the age of 46, but at 81 remains vice chairman of Fidelity Management and Research.

The widely respected investor made the comment during an interview with Josh Brown, co-founder and CEO of Ritholtz Wealth Management, that was published on Friday. Lynch got his start as an intern at Fidelity in the 1960s after having caddied for then–Fidelity president George Sullivan at a golf course in suburban Boston.

As to knowing what you own, Lynch shared in his conversation with Brown an anecdote about a long-ago call with singer and actress Barbra Streisand, who, he said, mentioned her anxiety over ownership of several stocks and not knowing what to do with them — and not even knowing what the companies did.

“People are very careful. They spend hours getting 50 bucks off on an airplane flight. They look at everything. And they’ll put $10,000 in some crazy stock they heard [about] on the bus — you know? And they have no idea what they’re doing. And somebody invented this awful term, before I got in the business, called play the market,” he said.

“Play,” he said, is “a very dangerous verb” in this context.

“Play the market is not what you do. You buy good companies, [and] you have to know what they do,” Lynch said, adding that an investor should be able to “explain to an 11-year-old in a minute or less” what the case is for owning shares of a particular company — not just that “this sucker’s going up.”

Lynch, remaining in reflective mode, talked about something else he has been quoted as having said: that investors have lost far more money preparing for corrections or trying to anticipate corrections than in actual corrections. Similarly, in the economy, everyone, including the experts, is often wrong — for instance, two years back, in widely forecasting a recession in 2024. “I think,” Lynch joked, “economists have predicted 33 of the last 11 recessions.”

He said investors have to be cognizant that they can and will lose money on the markets. Someone with three kids about to start college, he said, shouldn’t be in stocks but in less risky money-market funds.

Lynch also said that instead of analyzing economic and market forecasts, it’s important to look at savings rates, employment, oil prices, industries that have gone from miserable to improving. “I just want to know facts right now,” he said.

“I’d love to get next year’s Wall Street Journal,” he said. “I’d love to know what’s going to happen in the future. I’ve been trying to get that for the past 81 years.”

He said the business of investment really hasn’t changed much over the decades, even with the rapid evolution of trading tools and the ready availability of data and information. “It’s the same thing, this success of Amazon AMZN, Costco COST, Walmart WMT — forget the technology companies [such as big 2025 winner] Oracle ORCL,” he said. Those companies have done well for average investors, and Fidelity placed big investments in all of them “just using public information,” Lynch said.

A major change Lynch lamented, though, was that, a decade and a half ago, there were 8,000 publicly traded companies. “Now there’s three or four [thousand].”

His first stock pick at Magellan: Taco Bell YUM. A would-be pick he expressed disbelief in not having gotten in on: Starbucks SBUX.

When it comes to his own money, Lynch reported that he owns “zero AI stocks,” adding that “I’m the lowest-tech guy ever.”

“My wife is mechanical, my daughter’s mechanical. I can’t do anything with computers,” he said. “I just have yellow pads and a phone.”

The fund-management legend confessed that he has “no idea” whether the artificial-intelligence boom is resembling the dot-com bubble seen in the late 1990s and into the early months of 2000 and if investors might have chased that theme too far.

Arguably, in his prime, the most famous investor on Earth (though he volunteered in his conversation with Josh Brown that near-contemporary Warren Buffett of Berkshire Hathaway BRK.A BRK.B is “the best”), Lynch was queried by Brown about whether average investors can, as in the long-ago-expressed Lynch belief, fare as well as a big Wall Street investor, and said he still believes they can, if they look for opportunity in fertile places.

“People tend to concentrate about what’s in the new-high list,” he said, and those stocks can go up further, but he likes to look at companies on the low list.

Still Lynch said he thinks the so-called Magnificent Seven are good companies in the main. “Facebook, or Meta META, is an incredible company, Microsoft’s MSFT a great company, Google’s GOOGL GOOG a great company, Amazon’s a staggering company. I’m a little vague on Tesla TSLA, but BYD’s CN:002594 making a car in Hungary that’s a third of the price [and] a good car,” he said, adding: “I can’t get this humanoid thing.”

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But even if the act of investing, in Lynch’s view, remains largely unchanged, the Wall Street backdrop has shifted dramatically. “The market bottom in ’82 was 777” for the Dow industrials DJIA,” he said. “So we’ve had an incredible market since ’82, [and] we’ve had 10 or 12 declines — maybe a few more.”

“Everybody I knew grew up [being] warned, ‘The big one’s coming,’ ” he said. “We’ve had 11 recessions [but have] never had a big one. Imagine, in the [Great] Depression, they didn’t have Social Security. People when they retired, got older, moved in with their family. The family had to cut back on their spending, and they didn’t have unemployment compensation. We didn’t have the SEC. And we had a Federal Reserve that was asleep, to boot.”

Lynch said for modern investors “there are so many things that are better,” with so many guardrails in place that were not there for past generations, and with 63% of Americans owning their home, building wealth in that manner, versus far fewer owners in the 1920s.

He remarked that just 1% of Americans owned stocks in 1929, so the typical worker wasn’t losing everything as the equity market plummeted, “but we had an incredible depression, 30% out of work, not enough food, a terrible farming environment — it was awful.”

And despite all the economic downturns that have occurred since, not one has remotely recalled the ferocity of the Great Depression, said Lynch. “We had a lot of tests. We had many opportunities to have a big one. We’ve had bad presidents, bad Congresses, but we made it through.”

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