For Warren Buffett, disciplined investing begins with knowing—and respecting—the limits of your circle of competence. At the 2002 Berkshire Hathaway Annual Meeting, he explained that the test is simple: if you have doubts about whether you understand an investment, you don’t.
“It’s better to be well within the circle than to be trying to tiptoe along the line,” Buffett said. He cautioned against chasing opportunities simply because others are doing so, emphasizing that success comes from clarity, not speculation.
Buffett also reassured that a small circle of competence is not a disadvantage. “I’d say my circle of competence is pretty small, but it’s big enough. I can find a few things,” he noted. For investors, the lesson is clear: depth of understanding beats breadth of guesswork.
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© 2026 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.