Chapter 12 (“The State of Long-Term Expectation”) of John
Maynard Keynes’ The General Theory of
Employment, Interest and Money is one that seems good to go back and
re-read every now and then. Jeremy Grantham mentioned it in his
interview with Charlie Rose, and Warren Buffett has mentioned it on several occasions (and mentioned the quote below in his 1991 Letter).
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Related Keynes quote (which he wrote in a letter to a business associate):
“As time goes on, I get more and more convinced that the right method in
investment is to put fairly large sums into enterprises which one thinks one
knows something about and in the management of which one thoroughly believes.
It is a mistake to think that one limits one’s risk by spreading too much
between enterprises about which one knows little and has no reason for special
confidence….One’s knowledge and experience are definitely limited and there are
seldom more than two or three enterprises at any given time in which I
personally feel myself entitled to put full confidence.”