When our great, great grandchildren exit their flying amphibious cars in the distant future, many will look at Warren Buffett’s returns and believe he was a myth.
Well the man, the myth, the legend known as the Oracle of Omaha is real, and he’s alive right now (as I write this.) Because we are alive at the same time as the greatest investor of all time, we should heed the advice of such a knowledgeable man on the art of making money in stocks.
So, what is Warren Buffett’s top rule for investing?
Well, its actually two rules, but they are pretty much the same.
- Never lose money
- Never forget rule No. 1
Now you may be thinking, “Warren, are you trying to hide your secrets from us?” I think this is truly his main rule, and I’ll tell you why.
First off, lets think about something nobody does like to think about; losing money.
What happens when you lose money?
Well, you no longer have the money to invest in other things that could make you more money. So, by losing money, you’re not just losing your principal, you’re losing the future gains that could have been made if it had not been loss.
This is the principle that makes Warren Buffett such a powerful investor. He does not follow the crowd, in fact he’s somewhat of a contrarian, (check out Berkshire Hathaway’s holding list here, who else buys newspaper companies in 2015 anyway?!)
So, what made Warren Buffett’s top rule to be that you should never lose money? Well, it probably came from the time he lost money on what he thought would be a sure bet with the New England Textile Mills.
But, as seen before, when Warren makes a mistake, he often corrects himself and doesn’t make it again. The textile industry was one that Warren thought would be a boom, but rather became a bust.
So, in closing, if you would like to emulate one of the best investors of ALL TIME, then NEVER LOSE MONEY.
And, don’t forget there’s more to a statement than what often appears.