This morning, as I was reading the book “The Joys of Compounding” by Gautam Baid, it reminded me of a very painful investment mistake that I made, which cost me over $50,000. It also shared with me how I can prevent this from ever happening again.
I stepped into the investment world wanting to make a lot of money, and I used to invest in companies that painted a picture of unlimited possibilities. However, over time, I came to realize that true brilliant investors don’t focus on making money; they focus on NOT losing money.
Warren Buffett’s first investing rule is “Never lose money.”
Charlie Munger’s mental model of inversion states, “Invert, always invert: Turn a situation or problem upside down. Look at it backward. What happens if all our plans go wrong? Tell me where I’m going to die, that is, so I don’t go there.”
Gautam Baid also wrote in his book “The Joys Of Compounding”: “To make money, you need to have money. In other words, to maximize profits, you have to minimize losses. You must focus on capital preservation above all else. Value investors always think about the potential downside risks first when evaluating a potential investment.”
I highly recommend you reading “The Joys Of Compounding” to strengthen your investing mindset, knowledge and psychology!
Fund manager Bogumil Baranowski equally emphasizes the importance of “it’s the money we can’t afford to lose” in his book “Crisis Investing” and in our recent interview on my YouTube channel.
If you want to have a quick overview of the key discussion between Bogumil Baranowski and me, you can check out the summary notes here.
When we are able to take care of our downside, the upside will take care of itself. What an enlightening realization to have! 😊
Prevent investment mistake by educating yourself
The best way to prevent and reduce investment mistakes is to get educated first.
For myself, I invest in both stock and options to build up my portfolio. If you’re interested in starting your investing journey and want to learn the process step-by-step, you can join us in our upcoming free options investing masterclass to get started!
In the meantime, feel free to join my Telegram channel for daily investment updates. In the meantime, do check out my latest article on how to analyse any stock in 1 minute using this amazing free AI investing tool.
