Top 50 Rules to Investing
Rule : 29
Don't Lose Money
What Does Warren Buffett REALLY Mean By “Never Lose Money”?
One of the most widely quoted pearls of wisdom of legendary investor Warren Buffett is: “Rule No. 1: Never lose money. Rule No. 2: Don’t forget rule No. 1”.
At first sight, this seems to contradict another of the great man’s gems: “Unless you can watch your stock holdings decline by 50% without becoming panic-stricken, you should not be in the stock market”.
However, the contradiction can be reconciled if we recognise that there’s a difference between seeing a decline in the value of your portfolio and losing money. Doubtless, if you sell out in a panic when stock markets have plunged by 50%, you’ll lose money — certainly on your recent purchases. But if you hold through the downs of the market ideally buying more shares when prices are low — you should make money in the long run.
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