Ritholtz: Invest only in what you understand

“My grandfather was a wise man. He always told me, 'Never invest in anything that you don't understand.' And that's a simple piece of advice, but it's incredibly powerful. When you invest in something you don't understand, you're essentially gambling.”

“So, before you invest in anything, take the time to understand it. Understand the business, understand the industry, understand the risks involved, and understand how it fits into your overall portfolio. If you can't explain it in simple terms, then you probably shouldn't be investing in it.”