Do You Understand the Business?

Source: http://musingzebra.com/do-you-understand-the-business/

“Buy things that you understand”, “Stick to what you know”, or “Stay within your circle of competence” – We hear these advises all the time so we don’t invest in stocks we know little about. But what define understanding? How do we know if we truly understand a business? If I know Apple designs, develops, and sells consumer electronics and computer software, is that enough to say that I understand the business? Or is it something more? Before we can set a parameter to separate understanding from the lack thereof, we should first understand why is it important to know a business. The reasons are both psychologically and analytically.

Submitted August 14, 2018 at 05:20PM by dreamxite https://ift.tt/2KV1O9b