During his tenure Lynch trounced the market overall and beat it in most years, racking up a 29 percent annualized return. But Lynch himself pointed out a fly in the ointment. He calculated that the average investor in his fund made only around 7 percent during the same period. When he would have a setback, for example, the money would flow out of the...
Guts, in this case refers to risk appetite.
Risk appetite refers to the level of risk you are willing to take on while investing in order to grow your money.
The central problem around all investing approaches is that few people truly know their risk appetites.
Compounding the problem is our innate urge to protect hard earned capital, hence leading to investors yanking cash out when they should be putting cash in.
Peter Lynch, a well-regarded fund manager and author of the book One Up On Wall Street recorded this phenomenon well in the Magellan Fund. As quoted;