“You don’t have to be an expert on every company, or even many. You only have to be able to evaluate companies within your circle of competence. The size of that circle is not very important; knowing its boundaries, however, is vital.” – Warren Buffett

The concept ‘Circle of Competence’ is termed and popularized by Warren Buffett. Three years ago, I bought into Courage Marine, a shipping company with its primary business in transporting commodities such as coal. I had no in-depth knowledge of the shipping industry and it cycles but I invested anyway solely based on someone else’s analysis.

Last year, I was abandoned in the middle of the sea for being too “courageous” and I sold off my stake in Courage Marine at a 30% loss. I had no one to blame except myself for straying too far from what I knew and understood. This unfortunate event ...