The lowest return

There is no return lower than not getting your money back, a capital loss is an absolutely devastating loss of your savings. Therefore, the first and foremost rule of investing is protecting your capital.

We invest our spare cash in order to make a return on investment to finance our retirement, purchase a property or to support a lifestyle. We forgo the short-term benefits for hopefully a long-term gain - but what if we lose our capital? You no longer have the capital to generate a return, first you have to generate an income stream to rebuild your capital or possibly pay off the debts incurred from loans.

This is usually from the sale of labour, we trudge off to work and I think of this as units worked in terms of hours, days, weeks, months or years to get back to zero again. Let's not even calculate the opportunity cost of returning to zero; that is why with every investment my first thought is capital preservation, then and only then do I calculate my potential return.