Buffett has been dishing investing …show more content…
While the markets are filled with overwhelming information and numerous complexities, it is not essential or possible for an investor to know about everything in the markets. You don’t have to know how to value every security from every sector, industry or asset class. “You have to stay within your circle of competence” and choose investments that make absolute sense to you. As a result, one thing that Buffett doesn’t really practice is diversification. He believe “wide diversification is only required when investors do not understand what they are …show more content…
Buffett is convinced that “you don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” In other words, you don’t have to be exceptionally talented to be a successful investor. In fact, he and Charlie Munger (Vice Chairman at Berkshire Hathaway) often argue that intelligence hinders what would otherwise be simple decision-making. This is particularly the case when intelligence causes investors to form and follow complex strategies or mathematical models that appear to forecast the future, notwithstanding, future cannot be perfectly predicted. At Berkshire Hathaway’s Annual Meeting in 2009, Buffett noted that “emotional stability and inner peace about your decisions” is more important to succeed in markets than outright brilliance. At the same event, Munger – supporting Buffett’s view – drew attention to the role of complex calculations and projections in some of worst business decisions that he had seen, while mocking business schools for teach those methods “because, well, they have to do