The Daily Buffett

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The Kingdom Within

December 8th

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

Investors are often tempted to venture into unknown territories - the promise of a booming startup sector or the appeal of a foreign market can be irresistible. This pull away from familiar ground is a pitfall that can lead to poor investment choices.

The depth of our knowledge in our specific field is what truly matters, not the extent of our reach. Our power lies in mastering the small circle that we know inside out. This isn't about the fear of stepping out, it's about recognizing where our true strength lies.

But understanding the periphery of our circle of competence is equally crucial. It's about acknowledging where our expertise ends. This is akin to an explorer being aware of the ends of his map. It’s only through this realization of our limitations can we make truly informed decisions.

In investing, carving out your niche and understanding it deeply forms the foundation of success. It's not about conquering the vast expanse, but about ruling your small kingdom wisely.

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