Never Lose Money - AI Analysis Prompt
Use this Warren Buffett rule prompt to apply “Never Lose Money” to a specific company. It turns a vague opinion into a repeatable checklist: what facts you must verify, which assumptions matter most, what would invalidate the thesis, and the common misreads that create false certainty. Expect a written output you can save: a thesis summary, key risks, and next-step questions for filings and earnings calls. If a claim matters, require primary-source citations before you act. Educational only — not investment advice.
Full Prompt
You are a risk management analyst trained in Warren Buffett's "Never Lose Money" principle. Your task is to analyze {Company Name} through the lens of capital preservation and downside protection.
## Analysis Framework
### 1. Balance Sheet Fortress Assessment
- Current ratio, quick ratio, and cash position analysis
- Debt-to-equity ratio and interest coverage ratio
- Off-balance-sheet liabilities and contingent risks
- How does the balance sheet compare to industry peers?
- Could this company survive a 2-year revenue drought?
### 2. Downside Risk Mapping
- What is the worst-case scenario for this business?
- Identify the top 3 existential threats
- How much could the stock price fall in a severe recession?
- What is the maximum permanent capital loss risk?
- Are there any "ticking time bombs" in the financials?
### 3. Margin of Safety Calculation
- Estimate intrinsic value using conservative assumptions
- What discount to intrinsic value does the current price offer?
- Use at least 2 valuation methods (DCF, asset-based, earnings power)
- Stress-test your assumptions: what if growth is 50% lower?
- Is the margin of safety sufficient to protect against errors?
### 4. Business Durability Under Stress
- How did this company perform during 2008-2009? During COVID?
- Revenue decline sensitivity: what happens if revenue drops 30%?
- Customer concentration risk
- Regulatory and legal risk assessment
- Technology disruption vulnerability
### 5. Management Risk Assessment
- Does management have a history of value-destructive decisions?
- Capital allocation track record (acquisitions, buybacks, dividends)
- Insider ownership and alignment with shareholders
- Is management overly aggressive with accounting or guidance?
### 6. Risk-Reward Verdict
- Summarize: Is the potential upside worth the downside risk?
- Rate the investment on a 1-10 "Safety Scale"
- Provide a clear BUY / HOLD / AVOID recommendation from a risk perspective
- What conditions would need to change for you to reverse your verdict?
## Output Format
Present your analysis in clear sections with specific numbers and data points. End with a one-paragraph "Buffett Would Say" summary capturing the essence of the risk assessment.Related reading (close the loop)
Pick one path below to turn the output into a checkable, repeatable decision policy.
- Read the matching principleDefinition, boundaries, pitfalls, and a minimal checklist.
- Master profileMethodology summary + common misreads for this framework.
- Practice in scenariosTranslate conclusions into “what I do under stress”.
- More prompts from this masterTriangulate with multiple rules instead of anchoring on one prompt.
Educational only. Verify facts with primary sources and apply your own constraints.
Basic Questions
Why does Buffett make "never lose money" his Rule #1?
1. Math of compounding: A 50% loss requires a 100% gain to break even
2. Psychological protection: Large losses lead to panic decisions
3. Opportunity cost: Lost capital can't be deployed into the next great opportunity
Buffett means: Before every investment decision, first ask "how much could I lose?" rather than "how much could I gain?"
Usage Tips
Is the AI's "Safety Scale" rating (1-10) reliable?
How to interpret correctly:
- **8-10 points**: Financial fortress companies with extremely low permanent loss risk, but still check if valuation is excessive
- **5-7 points**: Some defensive strength but with weak spots — focus on reviewing the specific risk items AI identified
- **1-4 points**: Significant risk of permanent capital loss — avoid unless you have a special informational edge
Key reminder: AI may underestimate "black swan" risks (fraud, sudden policy changes). A high score doesn't mean zero risk. Combine AI scoring with your own judgment on management integrity.
Getting started
Does this prompt give investment advice or buy/sell calls?
What inputs should I provide for a reliable result?
Validation and boundaries
How do I validate the output?
When should I NOT act on the output?
More Rule Prompts
Explore other investment principles from this master.
When to Sell
When the facts change, I change my mind. What do you do, sir?
→Wonderful Company at Fair Price
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
→Admit Mistakes
Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.
→Greedy When Others Fearful
Be fearful when others are greedy and greedy when others are fearful.
→Courage to Act
Have the courage to act when opportunity presents itself. Hesitation leads to missed opportunities.
→Circle of Competence
Know your circle of competence and stay within it. The size of that circle is not very important; knowing its boundaries, however, is vital.
→Gradual Position Building
I never try to buy at the bottom and I always buy too early. But that doesn't matter because I have long-term goals.
→Insist on Margin of Safety
Never pay more than a business is worth. Wait for prices that provide a significant margin of safety. Being patient for the right price is more important than finding great businesses.
→Dollar Cost Averaging
If you like spending six to eight hours per week working on investments, do it. If you don't, then dollar-cost average into index funds.
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