If you don't understand something inside out don't directly invest in it - it's that simple. This is advice is really not plausible to follow. Even the profes

If you don't understand something inside out don't directly invest in it - it's that simple. This is advice is really not plausible to follow. Even the professionals can't figure out all the issues they need to figure out. That's why: a) so many old corporations get disrupted from the blind side and die b) so many acquisitions become a waste of of the acquiring company's money c) so many startups fail d) etc, etc Any type of investor in any type of industry or stage of life will know that there is still risk exposure because they know they are not omniscient. How many all-star teams are there who look like sure bets? Many, many. History shows that they're not sure bets. Yes, to do proper investing, you should do your analysis as much as possible, try to understand your target investment subject inside out, and make decisions based on sound logic and evidence, not hearsay and flimsy ideas. But you never know if you've missed seeing the black swan. The black swan doesn't hit you because you failed to do your analysis inside out. The black swan hits you because you had a blind spot that nobody could see, and you're just in the wrong place at the wrong time, despite all your intellectual understanding. The people who worked on the trading code for Knight Capital knew their stuff very well, they still missed the bug that caused their fund to lose hundreds of millions of dollars. The people at NASA were the best in the world at what they did, the Challenger still blew up. Peyton Manning won the NFL MVP and still lost the Superbowl. Stuff will happen when there are many unknown variables in the air, and you won't know where your exposed to risk, even if you know the subject inside out, until it hits you. The only thing you can do is mitigate all the risks you do see and diversify so that the risk that you don't see don't hurt you as much as they would if you put all your eggs in one basket. edit: I'll say that I agree with you to not put large amounts of money into things you don't understand. But I think the emphasis should not be put into that, but rather into diversification. Putting money into something you don't understand can be very lucrative if it looks good, as long as you can stomach the risk and afford losing all that money. So maybe I would say you should revise your statements from being about "large sums of money" and instead about "unacceptably large proportion of your money".