Inside The Circle Of Competence
What went wrong? Novice investors certain they had to be in stocks but unclear on where to start redefined “what you know.” Suddenly it embraced everything from stocks everyone was talking about at dinner parties to shares in companies they were familiar with but failed to grasp as investments–an important distinction. Lynch had it right. Investors who pick stocks for themselves must stay within a carefully drawn “circle of competence,” deliberately setting down what they know and what they don’t....