Specialisation

Much has been made about specialisation in a certain sector, industry or geography when investing.

That is, it is ventured, the only way to ensure an investment in a quality company. To a large extent, you are in the know about the sector, industry or geography that the company is in. It's quirks and eccentricies - whether it is in an upmarket or downcycle.

Whilst some people have experience in construction and real estate, others may be more well versed in the oil palm plantation and agricultural industry. Others still may be more familiar with the ever increasing semiconductor or ecommerce areas of business.

Circle of Competence

Yet the terminology for your area of knowledge within investing is called circle of competence. You have to know the edges as well as the core of your knowledge.

It is not, per se, known as your area of specialisation.

Indeed, investors like to believe that they can expand their horizons as they invest. Learning as you earn is almost a requirement in investment, not just only to avoid boredom but to ensure that the investor is able to detect and pounce upon more and more financial and investing opportunities.

Sector rotation and diversification

In order to ensure an ever expanding circle of competence, investors may wish to expand it by way of rotating their investments in different sectors.

If the investor knows the edges of their circle of competence, they have allocate some but not substantial capital in sectors, industries and geographies that amount to the edges of their circles of competences. This is how you increase your abilities as you go along.

This practice means that there is diversification alongside sector rotation.

Not Investment Advice

Do you agree with the investing approach painted above? Do you see how to enhance your abilities as you go along? If you have been investing for some time, have you been enlarging your circle of competence much at all?

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