My best friend worked for a while as a stock broker, then in 1998 he quit and began making his money by investing in the stock market full time.
He invested until he said the market looked too unstable and then pulled all of his money out, just before the recession hit.
Towards the end of those two years or so he said there were days when he would move $500,000 from one account to another. I don't know how much he was worth then, but if he had half a million to move around accounts it tells you he was probably worth at least a little more than that.
I read Peter Lynch’s books on investing. As you know, I’m sure, during the years he managed the Fidelity Magellan Fund he averaged a 29.2% annual return.
My investor friend tells me even if I learn Lynch’s investing secrets from those books, I still won’t be able to match his performance record in the market. He says that someone like Lynch or somebody like Warren Buffett, for example would be able to get a lot more information out of the companies they contact about the companies than the average investor can.
My friend says the best the average investor can do is get about 12% a year return in the market.
Is he right? I want to know because if 12% is the best I'll be able to do, even if I know Peter Lynch's method of investing, then I might as well just index the S&P, instead of actively trading stocks. At least there's a lot less risk investing that way and I'll do just about as well.
Many thanks,
C.L.
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