Preserve Capital by Investment Master Class

“The first rule of investment is don’t lose money. And the second rule of investment is don’t forget the first rule. And that’s all the rules there are” Warren Buffett

“As Warren Buffett has advised, the first rule of investing is, don’t lose money. The second rule is, don’t forget rule number one” Christopher Browne

Avoiding loss is the most important prerequisite to investment success” Seth Klarman

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famous value investors value investment Preserve Capital

Preserve Capital

"Avoiding permanent loss of capital is the number one rule" Bruce Berkowitz

“The possibility of permanent loss is the risk I worry about, Oaktree worry about and every practical investor I know worries about” Howard Marks

“The trick in investing is not to lose money. That’s the most important thing. If you compound your money at 9% a year, you’re better off than investors whose results jump up and down, who have some great years and horrible losses in others. The losses will kill you. They ruin the compounding rate and compounding is the magic of investing” Jim Rogers

“My goal was to keep losses down, and if I could catch a few stocks going up, compound returns would work their magic” Walter Schloss

"Greedy, short-term orientated investors may lose sight of a sound mathematical reason for avoiding loss; the effects of compounding even moderate returns over many years are compelling, if not downright mind boggling" Seth Klarman

"Return of capital is more important than return on capital" Mohnish Pabrai

"Most investors focus on how much they're going to make rather than how much they could lose.  Our focus is on the downside" Marc Lasry

"Safety. Considering the downside is the single most important thing an investor must do.  This task must be dealt with before any consideration can be made for gains"  Irving Kahn

“Avoid big losses. That’s the way to really make money over the years.” Julian Robertson

“The trick is to avoid losers. Losers are terrible because it takes a success to offset them just to get back to break-even. We strive to preserve capital on each investment. It does not always work out that way, but that is the goal” David Einhorn

“The definition of a great investor is someone who starts by understanding the downside. You must make the judgement in advance as to how much downside risk you are willing to take” Sam Zell

“When it comes to compounding, I’m not sure everyone understands that percentage losses and gains are not equal. I’ve always managed to avoid the large losses. Imagine something as simple as that being one of your secret sauces” Frank Martin

“The chance of gains means very little to us until we have attempted to rule out the probability of permanent loss” Chris Begg

"We believe in the power of compounding and the simple math is that you can't compound very well if you suffer too much on the downside.” Tom Perkins

“Makes sure that the probability of the unacceptable (ie the risk of ruin) is nil” Ray Dalio

“It’s our clear belief that one of the most effective ways to compound wealth is to minimize drawdowns” Charles de Vaulx

“Don’t focus on making money, focus on protecting what you have” Paul Tudor Jones

“Remember, winning in the investment game means not losing” Christopher Browne

“A market downturn is the true test of an investment philosophy” Seth Klarman

“People find insuring their house a necessity, not something to be judged against a financial strategy, but when it comes to their portfolios, because of the ways things are framed in the press, they don’t look at them in the same way.” Nassim Taleb

“When I buy or sell something, I always try to make sure I’m not going to lose any money first. If there is good value, then I’m probably not going to lose much money even if I am wrong” James Rogers

“I have no appetite for losses” Michael Platt

“An investor is more likely to do well by achieving consistently good returns with limited downside risk than by achieving volatile and sometimes spectacular gains but with considerable risk of principal. An investor who earns 16% annual returns over a decade, will perhaps surprisingly, end up with more money than an investor who earns 20% a year for nine years and then loses 15% the tenth year” Seth Klarman

“The power of compounding is so great that our first job as investors is to avoid anything that might short circuit it” Ira Rothberg

“An investor needs to do very few things right as long as he avoids big mistakes” Warren Buffett

“In my book, trying to avoid losses is more important than striving for great investment success” Howard Marks

“Most equity investors are optimists and focus on what can go right, but big drawdowns are the primary enemy of long term compound returns” Kevin O’Brien

“First off, we operate out of fear of losing. We institutionalise a lot of processes, especially risk management, and the risk function is framed by how much we can lose” Kyle Bass

"Preservation of capital is key to survival in this business"  Christopher Parvese

“What we care about is avoiding the permanent loss of capital and, increasingly relevant today, the permanent loss of purchasing power” David Iben

“Investing is a probabilistic business. For every commitment of capital we make, we compare our estimation of the likelihood of success with the probability of failure. We then assess how much we can make in a successful outcome with our best estimate of what we can lose in an unsuccessful outcome. We are willing to take more risk in a situation that offers more reward” Bill Ackman

“The most important rule of trading is to play great defence, not great offense” Paul Tudor Jones

“Never set yourself up for the knockout punch” Kyle Bass

Risk control is invisible in good times but still essential, since good times can so easily turn onto bad times” Howard Marks

“Thoughtful investors can toil in obscurity, achieving sold gains in good years and losing less than others in the bad. They avoid sharing in the riskiest behaviour because they’re so aware of how much they don’t know and because they have their egos in check. This, in my opinion, is the greatest formula for long term wealth creation – but it doesn’t provide much ego gratification in the short run” Howard Marks

“I learned that if I can simply survive in the market, just like surviving in the war, and not lose money, eventually I will make something” Walter Schloss

“I spend most the day watching my losers because if those are being managed correctly the winners take care of themselves”  Steve Cohen

“If you’re not thinking about how much capital you have at risk i.e. the downside, then I think you’re leaving out a very important part of the equation” Daniel Krueger

“The core tenets defining out trading philosophy – total focus on absolute return, risk control, liquidity and drawdown – will remain constant. These tenets have served us well through the financial convulsions of the past four years” Andrew Law

“The speculator has to be his own insurance broker, and the only way he can continue in business is to guard his capital account and never permit himself to lose enough to jeopardise his operations at some future date when his market judgement is correct” Jesse Livermore

“To paraphrase Ben Graham, the dean of fundamental securities analysis, the return of one’s capital is just as important as the return on one’s capital” Larry Pitkowsky

“What we learned at Drexel underpins our investment philosophy: Protect your downside and don’t lose money” Jon Sokoloff

“Your first thought must be how to protect your capital and make your trading as safe as possible” William D Gann

“The notion of understanding the first rule of life is important: don’t lose money” Mario Gabelli

"We have two principles. The first is : Don't lose money. The second is: Don't forget principle No. 1" Albert Nicholas

Risk management is the most important thing to be well understood” Bruce Kovner

Preserving private capital for long periods of time is the exception, not the rule, in history” Paul Singer

"We think if we stick to our philosophy and protect people on the downside, we can produce a pretty good record. The past 40 years has proved that" Albert Nicholas

"We truly believe the key to investment success is losing less than the market during declines - losing small is more important than winning big. The math works and it keeps you in the game when you should be" Brian Krawez

"Much of investing is about not losing just as much of life is about not dying. It is avoiding those places where you can die. That's why I'm not a really big fan of parachuting" Bruce Berkowitz

"What I believe in is compounding and not losing money" Colm O'Shea

"I have an intense dislike for losing money"  Phil Fisher

"Once we know that our downside is protected, then we look at the upside potential." Marc Lasry

"When I was in my early 30s at Bear Stearns, I’d have drinks after work with a friend of my father’s who was an entrepreneur and owned a bunch of companies. “Never worry about what you might earn on the upside,” he’d say. “Always worry about what you might lose on the downside.” And it was a great lesson for me, because I was young.   All I worried about was trying to get a deal done, for my investors and hopefully for myself. But you know, when you’re young, oftentimes you don’t worry about something going wrong. I guess as you get older you worry about that, because you’ve had a lot of things go wrong."  Henry Kravis

"Always understand your downside before you focus on your upside"  Steve Major

"One of the things I think has really made us good is that we have not just done very well picking stocks, but we've done a great job of avoiding losers." Jamie Dinan

“Consistency is the key. It is close to impossible to get a good, long-term, rate of return if you suffer serious negative numbers en route.  It’s the math.  A single year that is down 30% means you have to get 30% per year positive returns for the next four years to get back on track for 15% annual average.  Or, if you score 20% annually for four years, and then suffer a 30% decline, your five year average return is only 7%” Ken Fisher

“One of the tricks of this business is, keep your losses down and then, if you have a few good breaks, the compounding works well for you”  Walter Schloss

"When selecting securities, it's important that investors underwrite defensively to help protect capital" Matthew McLennon

"A very important data point for me is to try to avoid permanent loss of capital" Mohnish Pabrai

"Look down, not up, when making your initial investment decision. If you don’t lose money, most of the remaining alternatives are good ones."Joel Greenblatt

"Watch out for the downside.  Don't worry about the upside" Jim Tisch

"We believe in focussing on the preservation of capital before considering the return on it"  Steven Romick

"I am more concerned with preserving the Fund's capital than its recent profits, so that I tend to become more liberal with self-imposed limits when my investment concepts seem to be working" Geroge Soros

"Since you don't get advance warning about what kind of environment is coming next, you should always be concerned about preserving your money"  Seth Klarman

"The most important thing for me is that defence is ten times more important than offence.  The wealth you have can be so ephemeral; you have to be very focussed on the downside at all times"  Paul Tudor Jones

"Making capital preservation our first order of business is the best way to grow capital over time.  To most effectively compound returns you have to mitigate your downside - that's just basic math." Mark Thompson

"We truly believe that preservation of capital comes before all other aspirations. In other words, 'To win, first you must not lose'"  Frank Martin

"In general, survival is the only road to riches.  Let me say that again: Survival is the only road to riches.  You should try to maximise return only if losses would not threaten your survival"  Peter Bernstein

"My whole perspective on investing has been, and hopefully will continue to be, not to lose" Craig Effron

"We prioritize the avoidance of catastrophic loss first and foremost and focus on potential gains second" Zeke Ashton

Capital preservation is always far more important than capital enhancement” Seth Klarman

"I emphasize that our first goal is to control the risks of permanent loss.  When we analyse a security, we first look for the attributes that will protect us against incurring a loss that cannot be recovered within a reasonable period of time.  We will not commence analysing the positive attributes of a security until we are convinced that the risks of permanent loss in the security are relatively low"  Ed Wachenheim

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