Warren Buffett rightly known as the world’s top investor, has wealth greater than $130 billion. But he didn’t make his riches by knowing it all—his wealth comes from real life experiences and deep knowledge in a few areas. He calls it his “circle of competence,” a core principle behind every investment he makes.
Before we begin, please know that all the stocks named further, are only for driving a point and not a recommendation.
Now, for young investors in India swept up in the frenzy of the startup surge with giants like Zomato and emerging quick-commerce companies, this concept is super helpful. When navigating a space stuffed with chance and risks, getting your circle of competence straight could be the secret sauce to amassing long-term money.
What Is Buffett’s “Circle of Competence”?
Buffett’s approach is simple: stick to investments you understand. He was a strong believer of his quote, “Risk comes from not knowing what you’re doing.” In simple words, this means staying close to sectors and firms you can understand—where you can guess their long-term success. Buffett steered clear of tech shares for years since they weren’t his strong suit. He concentrated on areas within his expertise such as insurance and consumer products crafting his success story with names like Coca-Cola and American Express.
In India, most investors can’t resist running after the latest craze. And no blame there! After all the startup space is lively, hosting more than 100 unicorns with values hitting the billion-dollar mark or higher by 2025. People cannot wait to grab their share of whatever’s hot right now—like speedy shopping apps or fresh electric car businesses. But Buffett might throw a warning your way about all that. If the whole thing about a company flies over your head, you are not investing—you’re just rolling the dice.
India’s Mad Dash for Startups: Goldmine or a Pitfall?
The startup ecosystem in India is super exciting, no doubt. Big names like Swiggy, Paytm and Nykaa are grabbing investors’ attention and raking in the cash from investors. To give you an idea, in the year 2024 Indian startups got their hands on over $20 billion, and that’s straight from Tracxn’s numbers.
The young investors are all pumped to get in on the action and grab a piece of the pie.
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