If you want to make money with ASX shares, there are few better investors to learn from than Warren Buffett.
The Oracle of Omaha has smashed the market over many, many decades, much to the delight of shareholders of Berkshire Hathaway (NYSE: BRK.B).
While there are a number of investment rules used by Buffett, one arguably stands above the others – his golden rule.
Using Warren Buffett's golden rule with ASX shares
Given his success over the long, it's hard to deny that Buffett's golden rule works. But what is it?
Well, he once revealed the following: "Rule number one: never lose money."
While at first glance that might seem obvious and perhaps even a bit of a letdown, there is a lot more to it than first meets the eye.
In just three short words, Warren Buffett is actually imparting much more wisdom than you might think.
Nobody wants to lose money with ASX shares, but some investors are at great risk of doing so.
Never lose money
Although it can be exciting to try and strike it lucky with a hot new ASX share that is being hyped up on message boards, making these types of investments is speculative and a little different to putting everything on red at a casino. In fact, you might have better odds of success at the casino.
Take, for example, Brainchip Holdings Ltd (ASX: BRN). This semiconductor company has a long history of delivering nothing but disappointment to shareholders during its time as a listed company.
But thanks to a lot of hype, a little understood technology, and interest in artificial intelligence, the company's valuation soared into the billions in 2022.
If you had been sucked into the mania of early 2022 and invested $10,000 into its shares at the peak, you would now have just $1,400 left.
In order to get that $1,400 back to $10,000, you're going to have to turn your investment over more than seven times.
To put that into context, ASX shares have averaged an annual return of 9.6% over the last 30 years. Based on this return, it would take you 22 years to turn $1,400 back into $10,000. That's a lot of lost time!
Whereas if you had played it safe, your $10,000 would turn into $75,000 in 22 years earning the same 9.6% per annum return.
In light of this, if I were starting out with no savings, I would follow Warren Buffett's example and focus on buying ASX shares with strong business models, positive outlooks, talented management teams, and sustainable competitive advantages (or moats).
Doing this, I believe I would have the greatest chance of building significant wealth.