Michael Hiltzik: Legendary investment guru Peter Lynch says the move to index funds is a ‘mistake.’ He’s wrong
The least surprising financial news nugget in recent days may have been this one from a Bloomberg interview with Peter Lynch, one of the most venerated stock market gurus of our time.
Lynch, 77, told Bloomberg that the wholesale move of investors in recent decades from actively managed mutual funds to passive investing — that is, index funds — is “a mistake.”
He said, “Our active guys have beat the market for 10, 20, 30 years, and I think they’ll keep on doing it.”
The index fund was at first ridiculed, then tolerated, then grudgingly accepted, then reluctantly endorsed, and finally copied en masse.
On Wall Street, this is known as talking one’s book. Lynch, of course, was the quintessential active investment manager, renowned for his stock-picking skills. Fidelity Magellan Fund, the mutual fund he ran from 1977 to 1990, was the quintessential actively managed mutual fund.
By giving Magellan investors an annualized return of more than 29% — compared with an annualized gain in the Standard & Poor’s 500 index
