How not to lose money in markets: Experts on why protecting capital matters more than chasing returns
In the stock market, generating high returns often gets more attention than protecting capital. But market veterans argue that avoiding major losses, maintaining discipline, and managing risk are the real foundations of long-term wealth creation.
- May 22, 2026,
- Updated May 22, 2026 2:33 PM IST
Making money in the stock market often captures investor attention, but market veterans say avoiding losses may be even more important for long-term wealth creation. At a recent discussion on the “Art of Not Losing Money,” Rajeev Thakkar, Chief Investment Officer and Director at PPFAS Mutual Fund, and S Naren, Executive Director and CIO at ICICI Prudential AMC, highlighted why preserving capital should be a core investing principle.
Avoiding big losses
According to Thakkar, investors often underestimate the arithmetic of losses. He pointed out that if an investment falls from ₹100 to ₹50, a 50% decline requires a subsequent 100% gain merely to return to break-even. The deeper the loss, the harder recovery becomes.
Quoting Warren Buffett’s investing philosophy, Thakkar said: “Rule one is don’t lose money. Rule two is don’t forget rule one.” He added, “As long as you take care of the downside and if you are in asset classes with reasonable long-term outcomes, the upside more or less takes care of itself.”
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Asset allocation
S Naren stressed that many investors focus excessively on generating returns while paying too little attention to preserving capital. He argued that asset allocation remains one of the most effective tools for managing risk across market cycles.
“Our belief has been — if you practice asset allocation, it is possibly the best way to invest for the long term,” Naren said.
Rather than concentrating entirely on equities, investors can spread investments across debt, hybrid funds and equities depending on financial goals and risk appetite. According to the experts, this disciplined approach may help investors avoid emotionally driven decisions.
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Avoid market narratives
The experts also cautioned against chasing sectors and themes simply because they have recently delivered high returns.
Thakkar noted that investors often buy into themes trading at expensive valuations despite broader market metrics appearing reasonable. “At any point in time you will find some pocket where something crazy is happening,” he said, cautioning against blindly following momentum-driven trends.
Emergency funds
One of the strongest lessons discussed involved maintaining an emergency corpus. During periods of financial stress, investors without emergency savings may be forced to sell investments at unfavourable times.
Referring to the role of emergency funds, Thakkar used a driving analogy: “Brakes make the car go faster. If there are no brakes, you have to drive very slowly.” He added that emergency savings help investors stay invested even during periods of uncertainty.
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Trading and excessive risk
Naren also shared observations from his years in financial markets, warning retail investors against excessive trading activity.
“I have not seen retail investors make money in derivative markets,” he said, adding that disciplined long-term investing often works better than aggressive trading strategies.
The broader takeaway from the discussion was clear: successful investing may not depend solely on identifying winning stocks. For many investors, protecting capital, maintaining discipline and avoiding unnecessary risk may matter even more in building sustainable long-term wealth.
Making money in the stock market often captures investor attention, but market veterans say avoiding losses may be even more important for long-term wealth creation. At a recent discussion on the “Art of Not Losing Money,” Rajeev Thakkar, Chief Investment Officer and Director at PPFAS Mutual Fund, and S Naren, Executive Director and CIO at ICICI Prudential AMC, highlighted why preserving capital should be a core investing principle.
Avoiding big losses
According to Thakkar, investors often underestimate the arithmetic of losses. He pointed out that if an investment falls from ₹100 to ₹50, a 50% decline requires a subsequent 100% gain merely to return to break-even. The deeper the loss, the harder recovery becomes.
Quoting Warren Buffett’s investing philosophy, Thakkar said: “Rule one is don’t lose money. Rule two is don’t forget rule one.” He added, “As long as you take care of the downside and if you are in asset classes with reasonable long-term outcomes, the upside more or less takes care of itself.”
MUST READ: 'Unchecked FX depreciation...': What Radhika Rao says on rupee, RBI intervention
Asset allocation
S Naren stressed that many investors focus excessively on generating returns while paying too little attention to preserving capital. He argued that asset allocation remains one of the most effective tools for managing risk across market cycles.
“Our belief has been — if you practice asset allocation, it is possibly the best way to invest for the long term,” Naren said.
Rather than concentrating entirely on equities, investors can spread investments across debt, hybrid funds and equities depending on financial goals and risk appetite. According to the experts, this disciplined approach may help investors avoid emotionally driven decisions.
MUST READ: Rupee under pressure? Why this could be the time to buy Rupee assets
Avoid market narratives
The experts also cautioned against chasing sectors and themes simply because they have recently delivered high returns.
Thakkar noted that investors often buy into themes trading at expensive valuations despite broader market metrics appearing reasonable. “At any point in time you will find some pocket where something crazy is happening,” he said, cautioning against blindly following momentum-driven trends.
Emergency funds
One of the strongest lessons discussed involved maintaining an emergency corpus. During periods of financial stress, investors without emergency savings may be forced to sell investments at unfavourable times.
Referring to the role of emergency funds, Thakkar used a driving analogy: “Brakes make the car go faster. If there are no brakes, you have to drive very slowly.” He added that emergency savings help investors stay invested even during periods of uncertainty.
MUST READ: '100 is just a number. Let it depreciate': Arvind Panagariya to RBI as rupee nears 97/$
Trading and excessive risk
Naren also shared observations from his years in financial markets, warning retail investors against excessive trading activity.
“I have not seen retail investors make money in derivative markets,” he said, adding that disciplined long-term investing often works better than aggressive trading strategies.
The broader takeaway from the discussion was clear: successful investing may not depend solely on identifying winning stocks. For many investors, protecting capital, maintaining discipline and avoiding unnecessary risk may matter even more in building sustainable long-term wealth.