Circle Of Competence by Investment Master Class

“It makes sense that if you limit your investments to those situations where you are knowledgeable and confident, and only those situations, your success rate will be very high.” Joel Greenblatt

“If we have a strength, it is in recognizing when we are operating well within our circle of competence and when we are approaching the perimeter” Warren Buffett

“When I stray out of my comfort zone I usually get my head handed to me on a platter”  Peter Cundill

“If you know nothing about at area and haven’t studied the companies and the sector, stay away from it”  Roy Neuberger

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Circle Of Competence

Circle Of Competence

“The game of investing is one of making better predictions about the future than other people. How are you going to do that? One way is to limit your tries to areas of competence. If you try to predict the future of everything, you attempt too much.” Charles Munger

“Dealing in a circle of competence, dealing with companies that you have the ability to understand, being able to come up with a good analysis of a company’s value and earning power, is fundamental.” Lou Simpson

If you have competence, you pretty much know it’s boundaries already. To ask the question [of whether you are past the boundary] is to answer it. Charlie Munger

“You have to know what you know—your circle of competence.” Joel Greenblatt

“Don’t try to be a jack of all investments. Stick to the field you know best” Bernard Baruch

“If we can’t find things within our circle of competence, we won’t expand the circle. We’ll wait”  Warren Buffett

"Knowing you don’t know something is nearly as valuable as knowing it. The worst situation is thinking you know something when you don’t" Ray Dalio

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“Investors who confine themselves to what they know, as difficult as that may be, have a considerable advantage over everyone else” Seth Klarman*

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“Most businesses that I look at are typically rejected within two or three minutes or even less. They are rejected in two or three minutes for one of two reasons – they are either outside the circle of competence or the quick look at the price, market cap and such doesn’t make it interesting. They either are things that I don’t understand or they are things that don’t seem to be cheap by any measure that I would have an interest in.” Mohnish Pabrai

“You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.” Warren Buffett

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"One of the lessons I took from Warren Buffett years ago was to define areas you're comfortable with and stick to them" Thomas Russo

"Circle of competence essentially comes down to whether we understand the business.  There are several sub-questions under than; Do we know the right people in the industry? How well do we understand the products and customer decision making process? Are there unanalyzable things that could have a big impact?" James Chrichton

"The most important thing in terms of circle of competence is not how large it is but how well you define the parameter.  If you know where your edges are, you are way better off than somebody who has a circle five times as large but is very fuzzy about the border" Warren Buffett

"It's not how big your circle of competence is - it's more about how well you know the stuff in your circle" Mohnish Pabrai

"You have to be an expert in what you invest in.  You need to understand why you are invested.  If you don't understand why you are in a trade, you won't understand the right time to sell, which means you will only sell when the price action scares you.  Most of the time when the price action scares you, it is a buying opportunity, not a sell indicator" Martin Taylor

"Investors stumble when they get bull-headed or when they shift to doing something that is outside of their core competencies" Sam Zell

"A policy judgement that was wrong for me engendered quite a different kind of mistake, and one which did cost a significant amount of dollars.  My mistake was to project my skill beyond the limits of experience.  I began investing outside the industries which I believe I thoroughly understood, in completely different spheres of activity; situations where I did not have comparable background information.. An analyst must learn the limits of his or her competence and tend well the sheep at hand"  Phil Fisher

"The beauty of the stock market is that it gives us the luxury to avoid sectors and/or businesses that are outside our circle of understanding" Mohnish Pabrai

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