He said in his books, that if you can't average making 20% per year, it's cause you are not even trying. He said that 90% of his investments (for his Fidelity Magellan mutual fund) were bad investments, because he couldn't legally find GOOD investments for more than about 10% of the money he had to deal with. By law, no one client can have more than a given % of a publicly-traded company, and a fund's bylaws often restrict it to a given part of the market, or to only a given % of total funds going into a particular sector of the market. Also, when you have billions to invest, you can't dump it all or buy one thing with it all. There isn't that much stock in any one fast growing biz, for instance. Or, if others see such a huge buy order, they jack up the price of what you are trying to buy. Ditto if you try to sell a big bunch at once. So it takes you a week or more to move into or out of a big investment. Small investors can sell or buy in a minute flat, on the Net, so they can take advantage of what they see the "big boys" doing.
Also, mutual funds CAN'T just sell out, and hold gold, during a bear market. Small investors can do so. If you make 40% during a good year, 20% during an average year, and lose 50% during a bad year, you total 10% to the good, divided by 3 years, =3% annually. Since you pay taxes on that 3%, and there's 5% annual investment, you LOST more than if you'd simply held gold coins. However, if you make 40%, 20%, and aren't IN the market during a bear year, your 3 year average is 20%. Is that better than 3%? After tax and inflation, 20% is really 10%, at best, really. But after tax, 3% is 2.5% and after inflation, it's a NEGATIVE 2.5%. Is a positive 10% better than a 2% loss? You damned right it its, WAY better! Also, if you have $100, and you take a 50% loss, you have $50 left, right? Now, let's say that you have a 50% profit, what have you got? $75, right? You need a ONE HUNDRED % increase, just to get back to where you were! If you had just gotten out (and there ARE PLENTY of signs that a serious bear market is coming) you needn't take that hit.
The INVESTOR'S BUSINESS DAILY newspaper, and publisher William ONeil's book HOW TO MAKE MONEY IN STOCKS will guide you very well. Just don't beleive his BS that a mutual fund is a good place for your money. It's not. If you can't make 20% in the stock market, then just hold gold coins, and/or spend your money on training/education on how to make more money, and try to discipline yourself to spend the minimum amount, saving up so you need not work anymore, at least, not at anything that you don't LIKE to do.
P Lynch averaged 28%per year, 15 years
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