Peter Lynch achieved rock-star status in the 1980s when he ran the Fidelity Magellan Fund. So much so that an estimated one in 100 Americans invested at the time based on a very simple premise driving his work: "invest in what you know."
It's a common-sense mantra that still resonates with millions of folks today who think they're going to get ahead of Wall Street by doing nothing more sophisticated than buying an "iconic brand" they've encountered in their lives.
Problem is… being iconic isn't good enough in today's markets.
The Roaring '80s Worked in the Roaring '80s… for a Reason
Millions of investors took Mr. Lynch's common-sense advice to heart and went with what they "knew" – meaning they bought stocks based on personal experience and knowledge. Doing so made sense because the roaring '80s were just getting underway.
In fact, I can vividly recall the moment they began.
Dec. 12, 1980 – that's the day Apple Computer went public at $22 a share and 4.6 million shares were gobbled up in the largest stock offering since Ford Motor Co. went public 24 years earlier, in 1956.
I can recall with equal clarity when the markets responded.
Aug. 18, 1982 – that's the first time more than 100 million shares changed hands on the New York Stock Exchange in a single day. A year later, the Dow blew by 1,000 and has never looked back.
I remember these dates because that's when double-digit gains entered the minds of investors who were used to the single-digit returns of the 1970s, when you'd take profits and pack it in with only modest gains to show for your effort.
Greed became an operative word for millions who suddenly viewed the markets as a source of instant "strike it rich" wealth rather than something that produces value over time – as was the case for generations before them.
Movie characters like Gordon Gekko (the corporate raider Michael Douglas played so perfectly in 1987's smash hit, "Wall Street") didn't help. They made conspicuous consumption acceptable and something to aspire to. If you weren't living it up, then you weren't living… or so went the thinking.
It was entirely logical that Lynch's advice (misinterpreted though it was, which I'll get to in a minute) became so popular against this back drop.
Today's parallels are striking.
We've got the Kardashians, Paris Hilton, bling-laden rappers, and the Rich Kids of Instagram just to name a few – all of whom ply their trade on social media in front of hundreds of millions who want to "live the dream" at a time when the dream seems exceptionally limited.
Fast cars, champagne, jewelry – anything you can buy takes on new importance if it's worn or even shown on social media these days. For example, Kanye West's Adidas "Yeezy Boost 750s" sold out in minutes… seconds, according to some accounts…
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.