Warren Buffett is considered one of the greatest, if not the greatest, investor of all time.
His first two rules for investors are as follows:
Rule Number One: Don’t lose money.
Rule Number Two: See Rule Number One.
Now, let me tell you off the bat that being down in an investment will happen for sure. After all, my crystal ball hasn’t worked in years, and I doubt yours will be any better.
Being down, however, does not mean you have lost money.
I’m going to share my personal experience with you.
Two years ago, I purchased shares in a company called Splunk (NASDAQ: SPLK).
Splunk is a leader in cloud computing, data analytics and security. They help companies make sense of the massive amounts of data they collect.
When I purchased the stock, the price was $69 a share. Soon after my purchase, it proceeded to go from $69 to $54 over the next few months. That’s a 21% decline, in the blink of an eye.
Fast forward to January 2019, and…the stock is at an all-time high of $135.
Here’s another example for you. Around that same time, I bought shares in a company called Invitae (NYSE: NVTA) for around $7 a share. Invitae is a small genomics company trying to become the Amazon of their industry.
Soon after my purchase, the stock went to $5 a share – a 28% haircut.
Over the next six months the stock would remain between $5 and $6.
Today, it’s $17.
Many times, you’ll have to lose in order to win. You’re not always going to purchase a stock at the bottom and have it be smooth sailing all the way. That’s how investing works.
Click the image of the book at left to be taken to its Amazon page. (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)