In his 1993 letter to shareholders, Buffett wrote, "Diversification is a protection against ignorance. If you don't know what you're doing, it's hard to do well."
This is the most famous and foundational of all Buffett's principles. It sounds simple but carries profound implications: before even considering potential upside, an investor must rigorously assess downside risk. Permanent loss of capital—selling a stock for less than you paid—is the true definition of investment risk. Every investment decision should prioritize capital preservation first and return generation second. 10 golden principles of warren buffett pdf verified
Hold great investments indefinitely. Avoid frequent trading. In his 1993 letter to shareholders, Buffett wrote,
| # | Principle | The Question to Ask Before Buying | | :--- | :--- | :--- | | 1 | Circle of Competence | Do I truly understand how this business makes money? | | 2 | Margin of Safety | Is this price at least 25% below what it is worth? | | 3 | Mr. Market | Am I buying because of news (bad) or value (good)? | | 4 | Forever Holding | Would I hold this for 10 years if it never quoted a price? | | 5 | Economic Moat | Can a competitor kill this business by tomorrow? | | 6 | Business Owner | Would I want this CEO running my family business? | | 7 | No Debt | Could I survive a 3-year market shutdown without selling? | | 8 | Psychology | Is everyone else buying this? (If yes, run.) | | 9 | Integrity | Has management lied about earnings in the past? | | 10 | Patience | Is this a "fat pitch" or just a swing? | Permanent loss of capital—selling a stock for less
Warren Buffett's "10 Golden Principles" form a bedrock philosophy of value investing and disciplined living
(like a strong brand or high barriers to entry) that protect them from rivals. Be Contrarian fearful when others are greedy and greedy when others are fearful. Reinvest Your Profits : Harness the power of compounding