Should You Come Back to Magellan?

published 6 February 2008

Investors can now do something they haven't been able to do for a decade, except through some select retirement plans: They can buy into Fidelity Magellan, one of the most famous mutual funds ever.

Magellan, which reopened to all new investors in mid January, was the poster child of the Great Bull Market of the 1980s. Run by Peter Lynch from 1977 to 1990, it returned 27% annualized. Even after Lynch left, investors shoveled money into the fund. Assets peaked at $110 billion in 2000.

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The asset exodus could reverse course under Harry Lange, who took over Magellan in late 2005. Lange holds mainly large-company stocks with above-average earnings growth. But he will sometimes pick midsize- or small-company stocks or snoop for bargains. He also owns a chunk of foreign issues. (For Lange's views, see Magellan's Boss: Big Is Best.) Magellan stank in 2006's value-driven market. But with the revival of growth stocks in 2007, it gained 19%, beating the market by 13 points. With the wind at Lange's back, we think Magellan is worth a look. The fund's minimum is $2,500, and annual fees are a low 0.54%.

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Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage, authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.