Warren Buffett is widely considered to be the greatest stock market investor of all time. If you had invested $500 with the guru in 1965, that money would have been worth about $22 million at the end of last year.

Want to know what Buffett’s number one rule of investing is? Read on and I’ll tell you.

A basic rule

Given Buffett’s incredible level of success in the stock market, you’d expect his number one rule of investing to be complicated. But that’s not the case.

“The first rule of investing is: don’t lose“, says. It’s that basic.

Rule number one: never waste money. Rule number two: Never forget rule number one.

Warren Buffett

Risk management is the key to success

You’ll probably agree that it’s a little weird. Because all sometimes he loses money investing.

Buffett often lost significant amounts of money on certain stocks. For example, he lost hundreds of millions of dollars on this Tesco shares when his investment in the company backfired.

But I understand what he’s trying to say. And this risk management is really vital if you want to be a successful investor.

If you want to generate large profits in the long run, it is vital to minimize large losses. After all, if the stock falls 50%, you need to generate a 100% return to break even. If it drops by 80%, you need a 400% refund to get your money back!

Following Buffett’s reign

When it comes to strategies that can support investors follow the Buffett Rule, there are a few that are worth highlighting.

One of them is the diversification of capital through many different shares. No one ever chooses all of their stocks well. However, by taking a diversified approach to investing and purchasing 20 or more stocks for our portfolio, we can dramatically raise our chances of success in the stock market. Even if a few companies perform really poorly, chances are that a basket of stocks will do well over time.

Another is to pay attention to stock valuations. This doesn’t necessarily mean buying the cheapest stocks on the market (Buffett said it’s better to buy high-quality stocks at an average price than to buy mediocre stocks at bargain prices). However, this means focusing on stocks that have reasonable valuations and are unlikely to lose 80% of their value in the future.

Stocks worth watching right now?

In my opinion, one UK share is trading at a very reasonable valuation today Coca-Cola HBC (LSE:CCH). It is the main bottling partner Coca-Cola Company (one of Buffett’s largest holdings).

This stock currently trades at a price-to-earnings (P/E) of 13.1, taking into account next year’s earnings forecast. All things considered, I consider this a fairly low valuation.

It is a business that offers both long-term growth potential and defensive features. It is also a company with a fantastic history of dividend growth (over 10 consecutive dividend increases).

Of course, these stocks involve risk. One of them is a change in consumer tastes/preferences (i.e. switching to healthier drinks). Next are economic and geopolitical turbulences (currently some consumers are boycotting American brands).

However, at today’s valuation, I see this stock as very attractive. I think this is worth considering for a diversified portfolio.