Rate of Return vs. Return of Your Money

Mark Twain once famously said, “The return of my money is more important than the return on my money.” This timeless wisdom underscores a principle of investing—preserving your initial capital is paramount. It’s far better to make an investment that yields modest returns while keeping your seed money safe than to gamble on high-risk investments that may promise larger gains but risk losing everything.

Warren Buffet reinforces this mindset with his first rule of investing: “Don’t lose money.” He follows up with the second rule, “Don’t forget rule number one.” Simple yet powerful advice that highlights the importance of protecting your wealth before aiming for high returns. After all, if you lose your seed money, how can you hope to build wealth in the future?

It’s important to recognize that, even in seemingly successful investments, you can still lose money despite earning a positive average return. The key is not just to chase returns, but to safeguard your capital in a way that allows for steady growth over time.

Key Takeaways:

The importance of protecting your seed money before focusing on returns.
The wisdom of Warren Buffet’s investment rules.
Understanding how to evaluate both good and bad investments to ensure your capital is safe.

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