Peter Lynch: The Dumbest Mistake Investors Make

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The single, single most important thing 
to me in the stock market, for anyone,  

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is to know what you own. I’m amazed how many 
people own stocks — they would not be able to  

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tell you why they own it. They couldn’t say, 
in a minute or less, why they actually...  

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you really press them down, they’d say, “The 
reason I own this is the sucker’s going up.”

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And that’s the only reason. That’s 
the only reason they own it. And if  

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you can’t explain — I’m serious — if 
you can’t explain to a ten-year-old,  

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in two minutes or less, why you own a stock, 
you shouldn’t own it. And that’s true.  

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I think about 80% of people that own stocks. And 
this is the kind of stock people like to own.

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This is the kind of company people adore owning. 
It’s a relatively simple company. They make a very  

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narrow, easy-to-understand product. They make a 
one-megabit SRAM, CMOS, bipolar RISC, floating  

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point data I/O array processor, one optimizing 
compiler, a 16 dual-port memory, a double-diffused  

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metal-oxide semiconductor monolithic logic chip 
for the plasma matrix vacuum fluorescent display.

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It has a 16-bit memory. It has a Unix operating 
system for Whetstone Megaflop polysilicon,  

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a minor high-bandwidth — that’s very important 
— 6-gigahertz double-metalization communication  

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protocol, an asynchronous backward-compatibility 
peripheral bus architecture for wave interleave  

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memory, a token-ring and chained backplane, and 
it does, in 15 nanoseconds, a capability. Now,  

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if you own a piece of crap like 
that, you will never make money.

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Never. Somebody will come along with 
more Whetstones, fewer Whetstones,  

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or a bigger Megaflop or smaller 
Megaflop. You won’t have the  

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foggiest idea what’s happened. And 
people buy this junk all the time.