#1
Know Your Limits
"The most successful investors stay within their circle of competence. Know what you understand well and resist the temptation to venture outside it."
Stay within your circle of competence.
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David Swensen⭕ Circle of Competence
David Swensen's Circle of Competence Rules
David Frederick Swensen (January 26, 1954 – May 5, 2021) was an American investor and the chief investment officer at Yale University from 1985 until his death. He transformed Yale's endowment from $1 billion to over $31 billion, achieving an average annual return of 13.7% over his tenure. Swensen pioneered the "Yale Model" of institutional investing, which emphasizes diversification across...
3 principles·Circle of Competence
3 Key Circle of Competence Principles
#2
Deep Understanding Required
"Surface-level knowledge is dangerous in investing. Develop deep expertise in your areas of focus. True understanding means knowing what could go wrong."
Develop deep expertise, not surface knowledge.
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Expand Knowledge Gradually
"Expand your circle of competence gradually over time. Each new area of expertise adds potential opportunities, but only if mastered thoroughly."
Expand expertise gradually, one area at a time.
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What are David Swensen's key circle of competence principles?
David Swensen has 3 key principles on circle of competence. The most important one is "Know Your Limits" — The most successful investors stay within their circle of competence.
How does David Swensen apply circle of competence in practice?
David Swensen applies circle of competence through several key principles including "Know Your Limits" and "Deep Understanding Required". These principles guide practical investment decisions and have been tested across decades of market cycles.
What makes David Swensen's approach to circle of competence unique?
David Swensen's approach to circle of competence is distinguished by a focus on long-term thinking and fundamental analysis. With 3 specific principles in this area, David Swensen provides a comprehensive framework that investors at any level can study and apply to improve their decision-making.
