Always cover the downside first

“Rule No.1 is never lose money. Rule No.2 is never forget rule number one.”

- Warren Buffett

The astute investors all know – “Covering Downside” is the first priority when making investment decisions. Just like the “rules” that Warren Buffett has been advocated.

We can take a look at a simple example bellowed that demonstrates the affect of “losing” and subsequent “effort” that is needed just to make it back to where things were before.

If the initial lost is 5% then just a little bit more than 5% of “winning” needed to compensate that lost. However, when the lost started off at 20% then 25% is needed, 50% vs 100% … etc.

Smart investors like you know, when looking at investment opportunities, always consider the possible “downside” – the risk first.