The greatest scientific mind in history lost money in the Stock Market. What can you learn from that?

Sir Isaac Newton—yes, the Isaac Newton—lost a fortune speculating in stocks.

To me, he ranks just ahead of Einstein.

Now, consider what Newton achieved working alone:
1. Laws of Motion
2. Law of Gravity
3. Universal Law of Gravitation

Someone asked him, “Why do planets orbit the sun in elliptical paths, not perfect circles?”

Newton replied, “I don’t know. Let me think about it and get back to you.”

A few months later, he came back with an answer. But to get there, he had to invent:

4. Differential and Integral Calculus

And as if that weren’t enough, he also discovered:

5. Laws of Optics – deducing, through experiments with prisms, that white light is composed of all colors, and by reversing the process, he could recombine the colors to create white light.

He did all this before his 26th birthday.

And yet, Newton lost what would amount to millions in today’s money investing in the South Sea Company.

In 1720, speculation drove the company’s share price from £100 in January to over £1,000 by summer, before crashing later that year.

Newton’s estimated loss? £20,000. That’s a fortune in any century.

He famously lamented:

“I can calculate the motions of the heavenly bodies, but not the madness of people.”

So, what are the lessons?

1. Don’t be fooled by the mathematics used to project future stock values.Math can trick your mind into believing investing is a science. It’s not.

2. Science follows the immutable laws of nature, while the stock market mirrors the ever-shifting moods of the crowd. An apple falls at 9.8 m/s² in Australia or Africa, in all seasons, regardless of politics or national mood.

3. Always maintain sufficient liquidity and capital during periods of extreme volatility.

4. Financial market is not a machine, but a living thing. It falls, not under the theory of the universe, but under the theory of organic life. It is accountable to Darwin, not to Newton. It is heavily influenced by herd mentality.

When someone shouts Tiger 🐅, you run with the crowd. Evolution solves for survival, you have zero chance of survival against a Tiger without your Tribe.

Unfortunately, what works in jungle does not work in markets.

Lastly, never forget the wise words of Keynes

“Markets can remain irrational longer than you can remain solvent.”


Disclaimer: Views are personal and should not be considered investment advice.

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