#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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Joel Greenblatt⭕ Circle of Competence
Joel Greenblatt's Circle of Competence Rules
Joel Greenblatt (born December 13, 1957) is an American investor, hedge fund manager, and author. He is the founder of Gotham Capital, which achieved annualized returns of approximately 40% from 1985 to 2006, and is a professor at Columbia Business School. Greenblatt is best known for developing the "Magic Formula" investing strategy, a systematic approach that ranks stocks based on...
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 Joel Greenblatt's key circle of competence principles?
Joel Greenblatt 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 Joel Greenblatt apply circle of competence in practice?
Joel Greenblatt 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 Joel Greenblatt's approach to circle of competence unique?
Joel Greenblatt'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, Joel Greenblatt provides a comprehensive framework that investors at any level can study and apply to improve their decision-making.
