Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.

One of Warren Buffett’s famous quote is:
Rule No.1: Never lose money.
Rule No.2: Never forget rule No.1.

Let’s look at to what extent not losing money is important in investment.

To illustrate,
if an investor loses 10%,
how much percentage does he have to earn, to go back to the pre-loss level ?

When he lost 10%, he left with 90% of his initial investment.

To go back to 100%, he will need to earn back the 10% he lost using what he has now, 90%.
Profit% he needs = 10%/90% = 11.11%

To generalise, if he lost x%, profit% he needs, to go back to pre-loss level is x%/ (100% - x%) .

Look at the table and graph.

we will be able to see:
as we lose more, it is more difficult to earn back to pre-loss level.
Just imagine, if we lost 50%, we need profit% of 100% to earn back to pre-loss level !

Therefore, to stress again :
Rule No.1: Never lose money.
Rule No.2: Never forget rule No.1. :-)

Book : The Snowball – Warren Buffett and the business of life

"The Snowball – Warren Buffett and the business of life" is Warren Buffett’s authorised biography to be published on 29 Sept 2008.
website on the book

Thre is an article which features Warren Buffett "10 ways to get rich":
article

It’s a good read with condensed wisdoms.
I try to "re-phrase" the main points using my own words (after reading the "10 ways to get rich").

1. Reinvest your profits

Power of compounding;

2. Be willing to be different
Beware of "herd mentality";
Own yardstick to judge yourself, not the world’s;
Live your own life, not others

3. Never suck your thumb
Gather info/database before hand to enable fast decision making;
Set a deadline for decision;
Don’t procrastinate on decision

4. Spell out the deal before you start
Get the specifics/details before start

5. Watch small expenses
Beware of any cost that can eat into profit;

6. Limit what you borrow
Be debt free, then work on savings, then only invest

7. Be persistent
Importance of cost reduction;
Importance of negotiation;
Persistance even when in "underdog" situation;

8. Know when to quit
Beware of "mental accounting";
Know when to quit;
Learn from mistakes;
Never repeat mistakes;

9. Assess the risks
Risk analysis by using scenario analysis: best case scenario, worst case scenario;
Decision making analysis : "and then what ?" (much like decision tree)

10. Know what success really means
Success is not measured by dollars nor monuments;
Success is charity, be loved

Investment guru: Warren Buffett

There are many books on Warren Buffett, some of which that I like are:

The Warren Buffett Way
This is my 1st book on Warren Buffett. Works great as a summary, introductory book on Warren Buffett.

The Real Warren Buffett
I like this book very much. It touches on Warren Buffett in aspects of People Leader, Capital Manager and To Act Like An Owner. More insights on his concepts.

Buffettology
written by Mary Buffett. Perhaps she has a better understanding on Buffett’s method.

Of Permanent Value
emphasis is on his life and deeds.

There isn’t a book by Warren Buffett on his investment method yet but we can get a glimpse through his own writings/lectures.

From Berkshire Hathaway’s website, we can get:

Owner-related business principles:
website
Berkshire Hathaway annual reports:
website

Besides that, here is another good Buffett’s resources online:
website