Ability Quote by Warren Buffett
“What an investor needs is the ability to correctly evaluate selected businesses. Note that word “selected”: 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.”
About This Quote
Source Speech: Annual Shareholder Letter, Berkshire Hathaway, 1995
Investors should focus on evaluating businesses they understand, not all.
In simple terms: Evaluate only what you know.
Key Takeaway
Know your limits, assess within them.
Themes
investment
competence
assessment
Mood
thoughtful
analytical
Type
advisory
strategic
When to use this quote
- portfolio selection
- due diligence
- risk management
Key Concepts
circle of competence
boundary awareness
Questions to Reflect On
- How do you define your circle of competence?
- When should you seek external expertise?
A Different Perspective
Limits may exclude lucrative opportunities outside your expertise.
![“[In picking stocks] You really have to know a lot about business. You have to know a lot about competitive advantage. You have to know a lot about the maintainability of competitive advantage. You have to have a mind that quantifies things in terms of value. And you have to be able to compare…” quote by Charlie Munger](https://sms4smile.com/quotes/img-quotes/496/charlie-munger-458_able_in-picking-stocks-you-really-have-to-kno_2554597.jpg)
