I completely disagree with this!

Our investment portfolio is worthfar more than our annual expenses. This investment portfolio is very far from being what we can afford to lose, except in the sense that losing it won't immediately translate to dying or becoming homeless - it would "just" mean we could not stop working unless we'd massively slash our lifestyle.

The lesson is not to only invest what you can afford to lose. It's to match how you invest with when you expect to need the money.

Money you need in less than five years should be kept where it earns more than inflation, but has negligible risk - think high-yield savings accounts, CDs, etc..

Money you need in 5-10 years can be invested in assets that will out-earn the previous "bucket," but have some downside risk - think treasuries and bond funds.

Money you don't expect to need for a decade or longer can and should be invested as aggressively as you can stomach - think stocks and stock funds/ETFs.

We can argue whether this should only be index funds/ETFs and/or actively managed funds, but it needs to be invested in a way that will grow significantly over time so that you don't need to save every dollar you expect to need to spend - this money should work as hard as you do.

A small fraction of your portfolio, say up to 5%, can be invested in high-risk/higher-reward assets - think Bitcoin, private equity deals, etc.

Your friend's mistake wasn't that he invested the money he'd need in less than a year, but rather that he invested it as if he wouldn't need it for over a decade.