The quote means that your top priority as an investor should always be the preservation of your capital—protecting the money you have. Making a big profit comes second.

Buffett isn’t saying you’ll never have a losing investment; that’s an impossible standard. Instead, he’s emphasizing the need to avoid a permanent loss of capital that comes from making reckless, high-risk decisions. Think about it this way: if you lose 50% of your money, you need to make a 100% return just to get back to even. By focusing on avoiding a major loss, you set yourself up for consistent, long-term success.

While Buffett has repeated this sentiment many times throughout his career, he first stated it in his 1985 annual letter to Berkshire Hathaway shareholders.

The Context

In the letter, Buffett was discussing the importance of a disciplined, rational approach to investing. He was making the point that true risk isn’t the daily volatility of the stock market—the ups and downs that fill the news.

For Buffett, true risk is the possibility of a permanent loss of capital. This quote is his way of reminding investors to think like business owners, not speculators. By thoroughly understanding the companies you buy and their true value, you can avoid the kinds of mistakes that would lead to a massive, irreversible loss. The quote serves as a powerful reminder to always prioritize safety over the temptation of a quick, risky gain.

While Buffett has repeated this sentiment many times throughout his career, he first stated it in his 1985 annual letter to Berkshire Hathaway shareholders.

In the letter, Buffett was discussing the importance of a disciplined, rational approach to investing. He was making the point that true risk isn’t the daily volatility of the stock market—the ups and downs that fill the news.

For Buffett, true risk is the possibility of a permanent loss of capital. This quote is his way of reminding investors to think like business owners, not speculators. By thoroughly understanding the companies you buy and their true value, you can avoid the kinds of mistakes that would lead to a massive, irreversible loss. The quote serves as a powerful reminder to always prioritize safety over the temptation of a quick, risky gain.