Isaac Newton lost a fortune on England’s hottest stock


isaac newton


Isaac Newton was one of the smartest people to ever live.

But there’s a big difference between being a smart physicist and
smart investor.

And, unfortunately for him, Newton learned that the hard way.

In an updated and annotated text of Benjamin Graham’s
classic “The
Intelligent Investor
,” WSJ’s Jason Zweig included a small
anecdote about Newton’s adventures with investing the South Sea

“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.”

Here’s a look at how South Seas moved back then.

South sea bubble chart

Newton obviously wasn’t a dumb person. He invented calculus
and conceptualized his three laws of motion.

But this little episode shows that he wasn’t a smart investor
because he let his emotions get the best of him, and got swayed
by the irrationality of the crowd.

Or as Graham described it: “For indeed, the investor’s chief
problem — and even his worst enemy — is likely to be himself.”

Check out “The Intelligent Investor” here