To The Moon

I have watched the Warren Buffett’s 2024 Berkshire Hathaway Annual Shareholders Meeting over the weekend, here is one of the key lesson that I find quite relevant and important. It is the Self-awareness.

One of the traits that have make Berkshire Hathaway to be extraordinarily successful is self-awareness. Self-awareness is one of the keys to life and for us to live a good life.

Awareness about what we are good at but awareness about what we were bad at. And this what we do not understand when some people talked about this. This is actually called “Circle of Confidence.

In this article, I would like to share on what circle of confidence mean in the context of investing. In particular to Buffett, it is to have self-awareness of what we do not know is as powerful as what we know. We need to avoid trying to do things that we do not know. This is a great way to generate long-term advantage.

Confidence

When we embark to do something, we need to have this elusive quality called “Confidence”, that seems to empower some of us to conquer challenges effortlessly while others struggle to even take the first step. But what if confidence is not just an innate trait possessed by a lucky few?

What if it is a skill that can be developed and nurtured? Welcome to the concept of the Circle of Confidence.

Understanding the Circle of Confidence

The Circle of Confidence is a psychological framework that illustrates how confidence is built and maintained. At its core, it's a self-reinforcing cycle that begins with belief in oneself and progresses through action, feedback, and reflection, ultimately leading to increased confidence.

Imagine a circle divided into four quadrants: belief, action, feedback, and reflection. Each quadrant represents a crucial stage in the development of confidence.

Belief: The Foundation

The first quadrant of the Circle of Confidence is belief. This is where it all begins. Belief in oneself, one's abilities, and one's potential. Without belief, the circle cannot be initiated. It's about recognizing your worth, acknowledging your strengths, and embracing your weaknesses as opportunities for growth. Building belief often involves challenging negative self-talk, setting realistic goals, and cultivating a positive mindset.

Action: Moving Forward

Once belief is established, it is time for action. This is the phase where confidence is put into motion. Taking action means stepping outside of your comfort zone, facing challenges head-on, and pushing past fear and doubt. Whether it's speaking up in a meeting, tackling a new project, or learning a new skill, every action taken reinforces belief and strengthens confidence.

Feedback: Learning and Adapting

No journey to confidence is complete without feedback. Feedback serves as a reality check, providing valuable insights into what's working and what's not. Whether it is praise or constructive criticism, feedback helps to fine-tune skills, adjust strategies, and identify areas for improvement. Embracing feedback requires humility and a willingness to learn from both successes and failures.

Reflection: Integration and Growth

The final quadrant of the Circle of Confidence is reflection. This is where growth happens. Taking time to reflect on experiences allows for deeper understanding and integration of lessons learned. It is about celebrating successes, acknowledging challenges, and charting a course for future development. Reflection is an ongoing process that reinforces belief, informs action, and ensures continuous improvement.

Closing the Loop

As one progresses through the Circle of Confidence, the loop begins to strengthen. Belief leads to action, action leads to feedback, feedback leads to reflection, and reflection reinforces belief. Each revolution of the circle builds upon the last, creating a self-perpetuating cycle of growth and development.

So how do we see it in the field of investing? The Circle of Confidence can be applied to virtually any aspect of life where confidence is desired. Whether it's in the workplace, in personal relationships, or in pursuing personal goals, the principles remain the same. By consciously engaging with each quadrant of the circle, individuals can cultivate confidence and unlock their full potential.

Investing Confidence Circle

The "circle of confidence" is a concept often used in investing and trading to describe the range of assets or strategies that an individual feels comfortable and competent in handling. It is essentially the zone where you have sufficient knowledge, experience, and understanding to make informed decisions.

Here is why it's important:

Risk Management (Lose No Money)

Staying within your circle of confidence helps you manage risk effectively. When you invest or trade in assets or strategies you understand well, you're less likely to make impulsive decisions or react emotionally to market fluctuations.

Consistency (Invest For the Long Term)

By focusing on what you know, you can develop a consistent approach to investing or trading. This can lead to better decision-making and potentially more stable returns over time.

Reduced Stress (Explore All Options, Set Price target)

Trying to invest or trade in areas outside your circle of confidence can be stressful and lead to anxiety. Staying within your comfort zone can help you stay calmer and more focused on your goals.

Continuous Learning (Point 5 and 6 is always changing and adjustable)

Your circle of confidence is not fixed; it can expand over time as you gain more knowledge and experience. Engaging with new information and gradually expanding your expertise can help you broaden your circle of confidence in a controlled manner.

Summary

We need to always remember that we need to know our strengths and limitations as an investor or trader. While it is good to challenge yourself and explore new opportunities, it is equally important to recognize when we are venturing outside your circle of confidence and take steps to mitigate the associated risks.

Here is what will happen if there is a danger of false confidence in investing. So we need to understand that Confidence is not a static trait but a dynamic skill that can be cultivated and refined over time. By embracing the Circle of Confidence and committing to its principles, anyone can embark on a journey of self-discovery and empowerment. So dare to believe in yourself, take bold action, embrace feedback, and reflect on your experiences. The Circle of Confidence awaits, ready to guide you on your path to greatness.

Appreciate if you could share your thoughts in the comment section whether you think circle of confidence understanding and practising is important to us as investors or traders, and can it be cultivated from time to time?

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.

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