Markets & Investing

Sir Isaac Newton and His Giant Investing Blunder

In one of the greatest investing books of all time, “The Intelligent Investor,” by Benjamin Graham, there’s a little nugget about Sir Isaac Newton.

In the book, Graham writes about one of the smartest people to ever walk the planet, getting caught up in an investing blunder.

“Back in the spring of 1720, Sir Isaac Newton owned shares in the South Sea Company, the hottest stock in England. Sensing that the market was getting out of hand, the great physicist muttered that he ‘could calculate the motions of the heavenly bodies, but not the madness of the people.’ Newton dumped his South Sea shares, pocketing a 100% profit totaling £7,000. But just months later, swept up in the wild enthusiasm of the market, Newton jumped back in at a much higher price — and lost £20,000 (or more than $3 million in [2002-2003’s] money. For the rest of his life, he forbade anyone to speak the words ‘South Sea’ in his presence.”

Graham described Newton’s investing episode perfectly when he said, “For indeed, the investor’s chief problem – and even his worst enemy – is likely to be himself.”

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