It took me a long time to learn that, when researching a new idea, the puzzle pieces have to “click” for it to be investible.

You have to understand how the pieces fit if you hope to build conviction.

Even if you find what appears to be a great business, if you can’t make sense of how the pieces click together, you’ll lose conviction at the first sign of trouble.

It’s similar to “circle of competence” and putting stocks in a “too hard” pile, but I always found those concepts too limiting.

The puzzle pieces do indeed usually click if you stay within your circle of competence, but not always.

You may also find that the pieces click in industries you didn’t know much about. The products or services just make intuitive sense.

It may take more time to build the puzzle in new industries, but you can sense when you’re building momentum and when you’re not.

The earlier you realize the pieces are not clicking, the sooner you’ll move on to a better idea and improve your research ROI.