Rule 1: Never lose money.
By following this rule, he has been able to minimize his losses and maximize his returns over time. He emphasizes this so much that he often says, “Rule number 2 is never forget rule number 1.”
Warren Buffett, one of the world's most successful investors, has shared plenty of advice over his long career. But one piece of advice stands out as his top rule: “The first rule of investment is don't lose money.” And if you ask about the second rule?
Rule No.
1 is never lose money.
Many novice investors lose money chasing big returns. And that's why Buffett's first rule of investing is “don't lose money”. The thing is, if an investors makes a poor investment decision and the value of that asset — stock — goes down 50%, the investment has to go 100% up to get back to where it started.
Welcome to the Rule #1 Strategy, where we delve into the essence of successful investing through the principle of Rule #1: Avoid losing money. This foundational concept is akin to the Hippocratic oath in medicine, focusing on the importance of 'first do no harm.
By following these four golden rules—starting early, investing regularly, thinking long-term, and diversifying—you set yourself up for a successful investing journey. Remember, the goal isn't just to make money but to build wealth in a sustainable, low-stress way.
Buffett's most commonly cited financial advice is as follows, “Rule №1: Never lose money. Rule №2: Never forget rule №1.” So, before investing, determine whether you can lose the money you're investing in.
It's that simple. Rule number one: never lose money.
The 5-dollar rule is basically this rule that if something is less than 5 dollars or it's going to save me less than 5 dollars, if the amount that I'm worried about is $5 or less just do it. Don't even think about it. This is a rule—you might change this over time.
1. Spend less than you make. This may seem obvious, and boring, but spending less than you make is by far the biggest key to financial success. If you struggle with spending, focus on this one rule until you're at a point where you have positive cash flow at the end of the month.
Buffett's Two Lists is a productivity, prioritisation and focusing approach where you write down your top 25 goals; circle your 5 highest priorities; then focus on those 5 while 'avoiding at all costs' doing anything on the remaining 20.
Jimmy Buffett's Biggest Billboard Hits: 'Margaritaville,' 'It's Five O'Clock Somewhere' & More. A recap of the legendary singer-songwriter's top-performing Hot 100 classics.
“Price is what you pay; value is what you get.” Buffett is probably the most famous practitioner of value investing, which involves buying stocks at a discount to their intrinsic value.
Always sell a stock it if falls 7%-8% below what you paid for it. This basic principle helps you always cap your potential downside. If you're following rules for how to buy stocks and a stock you own drops 7% to 8% from what you paid for it, something is wrong.
The 90/10 investment rule is a rule of thumb for setting up your investment portfolio. The rule is relatively simple, advocating for splitting your portfolio, placing 90% of your assets into a low-cost S&P 500 index fund and the remaining 10% into short-term government bonds.
Everyone has different financial needs, but here's a golden rule: Whatever percentage your employer is willing to match, try to take full advantage of it. Anything less, and you could be leaving money on the table. Additionally, if financially possible, you may want to max out your 401(k) year after year.
The 90/10 rule in investing is a comment made by Warren Buffett regarding asset allocation. The rule stipulates investing 90% of one's investment capital toward low-cost stock-based index funds and the remainder 10% to short-term government bonds.
In a 2017 Reddit Ask Me Anything post, Gates recounted how Buffett stayed at his house and had Oreos for breakfast. “He mostly eats hamburgers, ice cream, and Coke,” Gates wrote. “He may set a poor example for young people, but it's a diet that somehow works for him,” the Microsoft founder added.
Clear High-Interest Debt Possible As Soon As Possible
“I don't know how to make 18%, and if I owed any money at 18%, the first thing I'd do with any money I had would be to pay it off,” he said. “It's going to be way better than any investment idea.”
Understanding the 1% Rule in Day Trading Stocks
In essence, the 1% rule dictates that you never risk more than 1% of your trading capital on a single trade. This might seem restrictive, but its benefits are unparalleled.