Investing 101

In new emerging marketplaces, there are always those who “see the world” more clearly than others. When oil first became the driver of drivers of cars, a few visionary entrepreneurs knew enough to partner with banks and regulators and the Rockefellers, Carnegies and Mellons among many others were borne.

The same deal happened with mutual funds. Peter Lynch – an early hire of the Johnson Family who own Fidelity – became a star mutual fund manager after producing market beating results as he ran Magellan, the fund that was once the largest in the world

Lynch retired and authored One Up One Wall Street, a kind of gritty “tell all” book mostly about how life works inside of a giant fast growing mutual fund. Many of the trading practices he espoused are illegal today as the world he lived in was one where “insider” information flowed directly from CEOs of companies and large institutions were highly favored in this information flow over individual investors. In 2000 Regulation Full Disclosure was passed which tried to level the playing field between institutions and individual investors. The Regulation required companies to say essentially nothing about operations until they held their quarterly conference or had special calls which had to be broadly disseminated to anyone who cared.

Fidelity’s Magellan Fund went through an ignominious deathish thing into mediocrity as it was crushed under its own weight/size/inability to buy and sell stocks without moving the entire market in them because it got so big.

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