Mutual fund superstar Peter Lynch famously said: “Invest in what you know,” meaning that you probably know more about your own occupation, location, and enthusiasms than most Wall Street professionals. But Lynch, who was the most successful mutual fund manager in the world in the 1980s, believed that you should do more than play hunches in familiar businesses; you should dig deeply into a company before risking your capital.
In tracing Lynch’s outstanding results with Fidelity’s Magellan fund in Lecture 10, you learn how his approach was to follow up a favorable first impression with rigorous fundamental analysis—looking at a firm’s financial statements, talking to management, and interviewing competitors. You will find his example inspiring, and it may even lead you to try your hand at assembling your own portfolio of stocks. But many people are too busy to take this approach and will benefit tremendously from knowing how active mutual-fund managers such as Lynch do their jobs. Mutual funds vary widely in style, asset allocation, risk, fees, and other criteria, and The Art of Investing helps you understand the many choices that are available, as well as the most common terms, such as load, expense ratio, and basis points.