The common-sense route to patient investing has turned into another way for people to take bad risks.
When Peter Lynch managed the Fidelity Magellan mutual fund from 1977 to 1990, he was the most famous investor in the country, bigger even than Warren Buffett. During his tenure, Magellan earned an average annual return of 29.2 percent, while its assets grew from $18 million to $14 billion.
Once the 1980s bull market began in August 1982, the star power of Lynch and a handful of other fund managers 1 caused investors to flock to actively managed mutual funds. For the next decade or so, hot mutual funds, and the managers who ran them, were all the rage.
Then came Aug. 9, 1995, the day Netscape went public. Almost overnight, mutual funds became passé, relegated to boring, employer-sponsored 401(k) retirement plans, as investors became fixated instead on fast-rising technology stocks. By the end of the 1990s, the Nasdaq had risen a staggering 685 percent in a decade. At dinner parties, people talked about internet stocks with the same fervor they had once reserved for mutual funds… Read full article