12.8What is capital protection?
1What is it?
Making preserving your money the first priority, before chasing returns.
2Why does it exist?
Warren Buffett’s famous rules: "Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1." Not literally possible, but the spirit is to avoid big, permanent losses.
3Practical use
Practical steps: emergency fund first; no borrowing to invest; stop-losses for trades; diversify; avoid penny stocks and "tips"; never risk money you need soon.
4Quick revision
- Protect first, grow second.
- Avoid permanent losses.
- No borrowed money.
5Knowledge check
Q1. What comes before investing?Show answer
An emergency fund.
Q2. Why avoid borrowed money?Show answer
It magnifies losses and adds repayment pressure.
Q3. Is capital protection about never losing at all?Show answer
No, it is about avoiding large, permanent losses.