Newton made a huge impact in the 1700s with his contributions on the Law of Motion, gravitation and by being the inventor of the first reflecting telescope. Stay with us here…he was also a fellow of Trinity College, a member of Parliament, and was knighted by the Queen in 1705.
By all accounts, the man was a freaking genius.
But, Boy Oh Boy, Did He Suck at Investing.
Think about that? How is it even possible that a person this smart could be bad at investing? Simple. And here is the story:
Enter the South Sea Company. This was a company that was established in the early 18th Century. In exchange for assuming England’s war debt, the company was granted a monopoly on trade in the South Seas.
Bingo. Investors loved this. They smelled a huge money making opportunity.
Sir Isaac Newton was no different than any other investor. He too had been charmed into purchasing shares of the South Sea Company and by 1720 after seeing the stock rise rapidly without reason at a fever pitch he rationalized, “I can calculate the movement of stars, but not the madness of men.” So, he cashed out. And profited big time from his investment.
Then he watched as the stock continued to soar THREE times higher than when he sold his shares. We can only imagine the regret he was feeling. As evidence, he went on to repurchase South Sea Company. Only this time he was buying it THREE times higher than when he last sold it.
Briefly, the stock continued to rise. We’re sure Newton was feeling wonderful about his decision. And then things started to go awry. The stock peaked weeks later and then cratered. Newton ended up losing £20,000 (nearly his life savings) which in today’s dollars equates to roughly $3,000,000.
Let That Sink In. Astronomer. Mathematician. Physicist. And….Broke.
Newton, a genius by all accounts, couldn’t pull off investing without letting his emotions get the best of him. Where does this leave you?
Simple. You need to find a professional that can help you navigate the emotional ups and downs of investing. We don’t care where you get help, just get help! Many traditional advisors have $1,000,000 account minimums before they’ll talk to you. Luckily for our clients, we don’t have a minimum and we focus on the ever confusing 401k that you might have set on “auto-pilot”.
Look, this isn’t about your IQ score. 1000s of folks using blooom are super smart people – doctors, teachers, firemen…shoot, we even have financial advisors using blooom for their own accounts! Yes, they are all smart. BUT they’ve come to the realization that it’s best to have someone hold your hand through the inevitable ups and downs you will see as an investor.
Don’t let your investing experience become a history lesson for someone else.
Published on February 22, 2017