The Wisdom of Warren Buffett

"If you understand an idea, you can express it so others can understand it."


This is Warren's way of testing whether he really understands a business before investing in it. If he can't explain it, he doesn't really understand it. He will not invest in a business he doesn't understand - nor should you!

In the struggle to be able to express an idea, you must acquire a fair degree of understanding, which is a good thing if it is an investment idea. This standard requires that you do your research before you buy the stock.

Warren's rule is simple: Can't explain it - stay away from it.

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