05/07/2008 11:29 am ET Updated May 25, 2011

Great Companies Make Great Investments--Right? Wrong. See Cisco

Whatever you do in your personal portfolio, don't fall for that crap about how "great companies make great investments." In order for a great company to be a great investment you have to buy it at a great price. The "great company" part won't do you a lick of good if you pay too much.

Case in point?

Cisco (CSCO).

Cisco's a great company, right? Hell, yes. It dominates a rapidly growing industry with a fabulous future, and it has been growing like a weed since the early 1990s. If you bought Cisco in the late 1990s, however, you paid waaaaay too much for it. In fact, unless you bought it before 1998, you'd have been better off in cash. Cash! If Cisco treads water for another few months, it will have been flat for a decade. (And we won't talk about how great an investment Cisco has been if you bought it in 1999, when it was trading at, gulp, $70).

So if you want to be a smarter investor, you can start by rolling your eyes when your broker pitches a stock by saying "It's a great company." Price matters.

(If you do fall for this one, though, I'll feel your pain--I myself got snookered by it in the 1990s)

See Also: Sorry, The Stock Market Is Still Screwed