Rule Du Jour: Rule #5: Only Invest in What You Know (Patreon)

My new segment - top rules to live by. Let's see if I can share one a day for 300 days. Here goes #5. PS Sorry for delay we were busy in getting Personality Profiler out this weekend.

Rule Du Jour: Rule #5: Only invest in businesses you fully comprehend

Whenever I've strayed from my areas of expertise - technology, finance, and crypto - I've gotten my ass handed to me. It's crucial to maintain an unwavering focus on your core competencies and resist the temptation to venture into unfamiliar territories.

How this Applies to Investing?

• It reduces risk and uncertainty. When you fully understand a business, you're better able to evaluate its strengths, weaknesses, opportunities and threats. You can assess the company's financial health, competitive position, and growth prospects more accurately. Bitcoin Miners is a great example. Most of them are crap, so beware as you go. As Warren Buffett said, "Risk comes from not knowing what you're doing."

• It allows you to spot opportunities others may miss. Fits with my get in early, get in hard approach. Deep knowledge of an industry or business model enables you to recognize undervalued companies or emerging trends before the broader market. Peter Lynch famously advocated investing in what you know! An inverse-thinking example is biotech. I believe that's a space that I am well aware I do not have education or training and biotech or pharmaceutical development and therefore, I steer clear of the space.

• It helps you stay calm during FUD times. I have spent many thousands of hours researching Tesla since 2017. When you comprehend a business's fundamentals and potential, you're less likely to panic when FUDDED to death by bears and haters. In fact gives you confidence to buy in even when they are on the verge of bankruptcy eg in 2018. Same w SOL when everyone said it was dead - I was the only one out there who stood up for it.