Warren Buffett's No. 1 Investing Rule: Don't Lose Money — Practical Advice For A Billionaire, But Can Regular Investors Apply It Successfully?

"The first rule of an investment is don't lose [money]. And the second rule of an investment is don’t forget the first rule. And that's all the rules there are." 

This quote from legendary billionaire investor Warren Buffett has become one of his most well-known aphorisms. It highlights his fundamental investment philosophy with both wit and clarity. 

Buffett's investment strategy stands out because of his aversion to losses. Instead of accepting losses, he tends to double down on his positions or even increase his investments when they go against him. He believes that if you like a stock at a certain price, you should like it even more when the price goes down.

Following Buffett’s rules of not losing money in investments can be easier said than done at times. No one wants to experience financial losses. But by taking calculated risks and investing in promising companies, people have the potential to reap significant rewards.

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Even Berkshire Hathaway Inc. was initially a losing bet. Buffett purchased a textile company, thinking it was a bargain. 

During a taped interview with CNBC's Becky Quick, Buffett openly discussed his regrettable decision in 1964 to acquire Berkshire Hathaway, a declining textile company based in Massachusetts. Buffett candidly referred to this move as a $200 billion blunder and one of the ‘worst investments he ever made.’

Despite recognizing the unfavorable circumstances early on, Buffett held on for about 20 years, driven by his determination not to give up easily. 

Buffett justified the decision to shut down the textile operations by considering the costs involved. The struggling business would have required substantial investment to remain competitive, but the returns would have been weak compared to Berkshire's other growing business lines at the time. Buffett believed that choosing to invest would have led to terrible returns while refusing to invest would make the company noncompetitive. 

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In a letter to shareholders in 1985, he referred to the difficult decision as a "miserable choice."

Berkshire Hathaway was transformed from a losing textile business to a diversified holding company worth $755 billion today.

Buffett's focus on longevity is evident in his investment decisions. When evaluating potential investments, he and his partners consider the company's competitive advantage and its ability to sustain that advantage over the long term. They look for businesses they believe will maintain their strength and profitability for five, 10 or 20 years.

Buffett didn’t invent this strategy, but he has certainly mastered it. This strategy has been popular in recent times with the recent market downturn and the growth of investing in private businesses and startups on platforms like StartEngine and Wefunder. The recent bear market saw a number of billion-dollar brands hit new lows on some of the companies like Meta Platforms, Inc. and Netflix Inc. These companies saw declines in excess of 70% before rebounding to near all-time highs. Similarly, the rise of equity crowdfunding platforms like StartEngine allows investors to invest in startups and early-stage growth companies at the earliest stages. These types of investments see investors holding for several years in earlier-stage companies they believe in. Then once they IPO, investors often see substantial gains.

His investment philosophy, often referred to as value investing, has been successfully applied in various instances. For instance, he acquired See's Candies in 1972 and invested over $1 billion in The Coca-Cola Co. stock in 1988, both of which turned out to be lucrative decisions. He holds the stock to this day.

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