For Warren Buffett, being a disciplined investor means staying within your circle of competence. How do you know the limits to your circle of competence?
“I would say this, if you have doubts about something being into your circle of competence, it isn’t,” Warren Buffett said at the 2002 Berkshire Hathaway Annual Meeting. “If you get to something that your friend is buying, or that everybody says a lot of money’s going to be made, and you don’t, you’re not sure whether you understand it or not, you don’t. You know, I mean, and it’s better to be well within the circle than to be trying to tiptoe along the line. And you’ll find plenty of things within the circle. I mean, it’s not terrible to have a small circle of competence. I’d say my circle of competence is pretty small, but it’s big enough. You know, I can find a few things.”
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© 2023 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.