4. Do your homework

It takes a lot of work to be certain about the prospect of a business. In Buffett’s case, he analyzes different aspects of the business such as its economic performance, management team, track record, and more. Only after doing the research can he be sure whether or not a business is worth investing in.

Similarly, you need to do your homework for the opportunities that come your way. Just because everyone else says that it’s good (or bad) doesn’t necessarily mean that it’s indeed good (or bad).

5. Be patient

This is related to mastering your emotions, but I think it’s worth a deeper look. Patience is one important lesson I learn from Warren Buffett. He said that one strength of his company is, strangely, inactivity. Other managers are often “addicted” to activity which makes them trade a lot of mediocre stocks. Buffett, on the other hand, is patient enough to wait for the great opportunity to come. This is probably one of the biggest reason why people do what they don’t know: they can’t wait long enough. Greed (to get quick gains) or fear (of not looking good in front of others) are at play here.

***

The next time you are about to take a risk, stop for a moment and ask yourself:

    * Do I know what I’m doing?
          o Is it in my circle of competence?
          o Have I done my homework?

    * Do I master my emotions?
          o Are greed or fear at play?
          o Am I being impatient?

By being honest with your answers, you can avoid many unnecessary troubles.

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