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We Study Billionaires - The Investor’s Podcast Network cover image

TIP658: Peter Lynch’s Guide to Investing in Your Expertise w/ Kyle Grieve

We Study Billionaires - The Investor’s Podcast Network

NOTE

Pricing Matters More Than Performance

A high price-to-earnings ratio, like the 500 for Electronic Data Systems, indicates that an investment may take centuries to recover its original cost, regardless of the company's growth. Despite EDS's business success and growth in earnings and sales, its stock price plummeted from $40 to $3 due to its inflated valuation. This highlights the critical importance of price in investing; a high price can lead to significant losses even in successful businesses. Additionally, successful investing does not require perfection; achieving a portfolio with just 6 out of 10 successful investments can still yield satisfactory returns, underscoring the necessity of selecting investments wisely while accepting the inevitability of some failures.

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