"Understanding" versus "Knowledge"

You can put knowledge in a book and sell it.  But not understanding.

To understand is to combine knowledge with experience.  Not someone else's experience: your own.  Experience only comes from doing, not from reading about what someone else did (though that can add to your knowledge).

The meanings of these two statements are clearly different.

Mr. A has a good knowledge of investing.

Mr. A understands investing.

Knowledge usually means a collection of facts - a "persons's range of information," or the "sum of what is known."  But "understanding" implies Mastery - the ability to apply information and get the desired results.

Building Knowledge

25 Rules to Grow Rich By #11: Building Knowledge
November 27, 2006 @ 10:23 am - Written by Trent


Rule #11: If you don’t understand how an investment works, don’t buy it.

The sheer hubris of the above statement is incredible. “Leave the real money makers to the experts; you go along and play with your savings account at your local bank, junior.” It’s typical of the attitude of many people in the financial sector as they try to play Prometheus, bringing the fire of financial knowledge from the gods of Wall Street.

The fact is that most investments are not all that complicated. If you are interested in a particular investment, pick up a book at your local library (or your local bookstore) and read about it. This is an opportunity to learn something that could be directly useful to your pocketbook, not an excuse to run for the hills like a coward.

I agree that you should never buy an investment that you don’t understand, but merely saying, “I don’t understand it, so I’m not going to buy it” is a losing philosophy. You’re much better off saying, “I don’t understand it, so I’m going to learn about it.”

Let’s rewrite that rule:

Rewritten Rule #11: If you don’t understand how an investment works, do some research before you invest; don’t just write it off.

http://www.thesimpledollar.com/2006/11/27/25-rules-to-grow-rich-by-11-building-knowledge/