The Real-World Power of “Don’t Lose Money”
Warren Buffett’s Rule No.1 is as simple as it is eternal: “Never lose money.” Rule No.2? “Never forget Rule No.1.”
In a world obsessed with big winners, moonshots, and FOMO-fueled trading, this mindset is more important than ever. Missing out on extra gains may sting your pride, but losing capital puts your whole compounding future at risk.
Case Study: CRNX and the FDA FOMO Trap
Recently, I felt a familiar urge: “Why not put even more into CRNX (Crinetics) ahead of the big FDA decision?”
- Management was highly confident in approval. The company ramped up hiring, prepped for global sales, —all signs pointing to a bullish launch.
- It would have been easy to break my risk rules and double down early—aiming to ride the “sure thing” wave.
But then I remembered my process: nothing is guaranteed before official news—even the most confident management can be surprised. If I let CRNX swell beyond my pre-set allocation, a single setback could have torpedoed months of portfolio work.
Instead, I kept CRNX at its planned size—accepting that I might “miss out” on extra upside, but knowing I’d survive any negative surprise.
The Benefits of Prioritizing Capital Protection
- Freedom to Play Again: Avoiding a catastrophic loss means you preserve cash for the next opportunity—essential in moonshot investing.
- Peace of Mind: No single trade can ruin your portfolio or your sleep. This unlocks better, more rational decisions next time around.
- Long-Term Compounding: Protecting against big drawdowns is the secret to letting winners work.
Why Most Investors Forget This
- FOMO Culture: Social media celebrates every jackpot and “woulda-coulda-shoulda.” The sting of seeing a stock double without you can override your better instincts.
- Hindsight Bias: It’s tempting to believe every signal was obvious… after the fact.
- Emotional Risk: Losses have double the psychological impact of missed gains, but we calibrate our moves to fantasy winners, not real-world downside.
Make It Your Process: Lessons & Takeaways
- Size every moonshot to risk, not upside.
-
No “bet the farm” positions—
not even in the face of management confidence or consensus optimism. -
Only increase allocation after official, positive catalysts.
Never before. - Accept that “missing the last 20%” is a win, not a regret, if your capital is intact for the next trade.
Buffett reminds us: Don’t lose money. I’d add—don’t let “what if” FOMO trades scramble the process. Missing extra gains is survivable. Losing a big chunk? That’s the game-changer you want to avoid.
Closing Thought
If you ever find yourself tempted to “go big or go home,” step back and remember: staying in the game—and letting your capital compound over many seasons—is the edge that separates the real winners from the flashes in the pan.
It’s okay to miss a hero trade, as long as you keep your capital safe. You only need to get rich once.