The Best Investors and Their Worst Investments is a must-read for every investor who is hoping to succeed in the financial markets. The book takes you through the big mistakes that legendary investors such as Jesse Livermore, Benjamin Graham, Warren Buffett and Paul Tudor, among others, have made intheir careers and what lessons they learned from those mistakes. Let’s turn their mistakes into cruciallife lessons and walk away with aclear understanding of how successful people tackle and overcomeuncertainties.

 

1. BENJAMIN GRAHAM
“In my nearly fifty years of experience in Wall Street I’ve found that I know less and less about what the stock market is going to do but I know more and more about what investors ought to do; and that’s a pretty vital change in attitude.”

Benjamin Graham’s remarkable career was not without mistakes and poor judgment calls. For instance, in 1929, during the start of the Great Depression, prices plummeted and according to the principles of value investing, most shares were trading at less than their intrinsic value, thus making it a good time to buy.

Many of these companies were valued at prices even lower than their cash reserves. However, as Graham learned, prices can take a very long time to catch up to value and from 1929 to 1934 he lost almost 70% of his net worth.

Noted economist John Keynes has rightly said: “Markets can remain irrational longer than you can remain solvent.”

This experience showed Graham that value investing,while especially useful in the long term, was still vulnerable in the short term to the emotions of investors and that there were no guaranteed or fixed rules in the market.

Overpriced shares can become even more overpriced, and underpriced shares can still fall drastically in value.The evidence of this understanding can also be seen in statements given years later.

In 1976, he stated that while detailed security analysis of the kind that he originally talked about worked when he had started investing roughly 40 years ago; it was not as useful anymore due to the sheer number of people utilizing it, diluting the returns.Thus, we see that he did not have blind faith in the applicability of any particular principle or method.

2. JESSE LIVERMORE
“All my life I have made mistakes,but in losing money I have gained experience and accumulated a lot of valuable don’ts. I have been flat broke several times, but my loss has never been a total loss. Otherwise, I wouldn’t be here now. I always knew I would have another chance and that I would not make the same mistake a second time. I believed in myself.”

Jesse Livermore was one of the first and the most prolific market speculators in the American market. He would alternate between making huge profits, and large losses. And by the end of the crash in 1929, Livermore was worth the equivalent of around $1.4 billion in terms of today’s money. However, he had lost it all by 1932, and was in debt of over $5 million toover 30 creditors.

This was the culmination of a pattern that had started in his teenage years, with him starting trading at just the age of 14, and making $1,200 by the age of 17, making $50,000 by the age of 23 and going bankrupt in the very same year, leaving New York to go to St.

Louis where he made $2,800, and then going back to NewYork where he made $1,00,000 in just a few trades. This he soon turned into $6 million, which again he lost shortly after.

“I had made a mistake. But where? I was bearish in a bear market. That was wise, and I had sold stocks short. That was proper. But I had sold themtoo soon, and that was costly. My position was right, but my play wa wrong,” Livermore had said.

The key takeaway from the investing career of Jesse Livermore, in his own words, is learning the ability to manage risks.It is easy to have simplistic phrases like buy low, sell high but in practice these are often difficult to execute.

Furthermore, while it is possible to learn from our mistakes there are simply too many possible mistakesfor us to rely on learning from them,instead of proactively avoiding them.

Investing is inherently uncertain and trying to stick blindly to any fixed principles, or trying to avoid mistakes made in the past is not the optimal solution.

As Jesse Livermore would state in his later years, using your own judgment and avoiding mistakes born out of carelessness could have saved him from bankruptcy more than once.

3. MARK TWAIN
While Mark Twain may be one of the most famous authors in the world, in his own words, he was an abysmal investor, due to one major mistake he repeated several times over: getting attached to one poor investment and being unwilling to let go and accept the loss.

Perhaps the most glaring example of this is when an inventor named James Paige convinced Mark Twain to invest in the production of a new kind of typesetter.

Despite the constantly unmet deadlines, mounting expenses and losses he continued to invest in it,speaking fondly of James Paige,unable to accept the loss and give upon his investment, until he was forced to by outside financial pressure, with losses that would equal almost $5 million in today’s money.

There are many such investments that Mark Twain made in his life and they all illustrate how the two driving forces of greed and fear make it next to impossible to let go of a losing investment.

The more an investment loses value,the harder it is to accept the loss,which paradoxically leads to holding on to the asset and thus potentiallylosing even more, driven by the fear and greed of it recovering its original value, or potentially even investing more in the hopes of offsetting ourlosses by a small rise in price.

4. JACK BOGLE
While today Jack Bogle is chiefly known for creating the concept of the index fund, a fund that seeks to equal the index funds returns instead ofbeating it, his creation of this idea didn’t come until he was nearly 50 years old.

In fact, much of his earlier career was devoted to ventures that were exactly the opposite of this conservative approach, most of which ended poorly such as merging the Wellington Fund, a balanced fund with a very aggressive firm that was designed to bring in new and speculative ideas about trading and bring in quick profits.

Despite some short-term success, the fund collapsed in 1969. Several other funds started by Bogleduring this period also performed poorly or collapsed entirely.

One such fund, called Techivest, was designed to utilize technical analysis to gain an advantage.Due to these repeated failures, in 1974 Jack Bogle was fired from the position of CEO of Wellington management but managed to convince the management to let himcontinue to head the Wellington Fund.
 

Here Bogle applied all the lessons he had learned over the past years,which led to the creation of the first index fund named Vanguard, which itself took over 16 months of discussion with the management of Wellington as it was initially a very unpopular concept due to its pursuitof average results.

Today, Vanguard manages over $4 trillion in assets, making it the largest investment firm on the planet.

It is important to note that without his initial failures Jack Bogle may not have had the idea or even the motivation to create his crowning achievement.

It took a series of highs and lows,gains and losses and a variety of experiences that almost no one knows about before he created the one thing almost everyone knowsabout – index investing.

5. MICHAEL STEINHARDT
A principle made famous by Warren Buffett but practiced by many successful investors is that of staying within one’s circle of competence, or more plainly sticking with what you know and avoiding what you don’t.Michael Steinhardt was among the first to create one of the most successful hedge funds in the world,averaging a result of 24% from 1967 to 1995, outperforming all his competitors by a significant margin.

In the 1960’s when the US markets were failing, an SEC study showed that almost all of the largest funds in this category had fallen by an astounding 70% on average.

However, Steinhardt’s fund was theone in the entire country that made a profit.Due to such results Michael Steinhardt became well-known as an extremely capable investment manager, with people in his ownwords “begging him to take their money.”

This is also what led to him having to invest outside the US, thus venturing outside his circle of competence and some of the biggest losses of his life.While he was extremely familiar with the American markets due to his experience in it from a young age, he had no exposure whatsoever to the markets he was currently expanding into, such as cross-currency trading and equity in the European markets.

In 1994 a rise in interest rates in the US caused massive losses in his foreign investments, with his fund losing $800 million in just 4 days. He retired the next year in 1995.

From its start till 1994, his fund had produced a very respectable 31% a year return. In the final year before his retirement, the losses, however, were so large that they brought down his nearly 30 year average to 24%.

Furthermore, the stress and pressure placed on him due to these events also took its toll and were in his own words “one of the primary reasons for his retirement.”

There are many factors which may lead to one wanting to abandon theircircle of competence - FOMO for aregular investor, or simply too muchfund inflow for an institutional investor.

But like Michael Steinhardt’s career shows, investing outside your area of expertise is akin to shooting an arrow in the dark and hoping to hit a targetthat may not even be there.

6. WARREN BUFFETT
Overconfidence is in our blood by definition when we have made a decision we believe it is the correct one and it is a natural human tendency to seek to confirm our beliefs. Even gurus like Warren Buffett are no exception to this.In 1993 Warren Buffett purchased a company named Dexter Shoes.

He raised the money to purchase this company by selling the stock of Berkshire Hathaway.He was confident in his assessment of its value due to his prior experience in the footwear industry and its fundamentals matched the principles he had always invested by.

In this investment, he saw a long profitable history with good management in an industry that was unlikely to be replaced anytime in the future, and even called it one of the best run companies he had seen.

However, Warren Buffett ignored the absence of one of his own criteria. A “moat,” which is to say a competitive advantage that would protect its position and market share in the industry.

He was confident enough in his own judgment, the management and the market that he felt it would suffice.But that was not the case.In 1994,sales and profits started to fall due to foreign competition. Within five years, profits were down by morethan half.

In 1995, almost 93% of the footwear purchased in the US was made overseas, primarily in China and domestic US producers could not compete with their pricing.

To his credit, Warren Buffett quickly acknowledged his mistake, attributing it to overconfidence saying that as a financial disaster it could rank inthe Guinness Book of World records,hitting him on two fronts.

Not only did Dexter Shoes end up bankrupt,the Berkshire stock sold to purchaseit originally would have been worth $6 billion.There is no question that Warren Buffett is among the greatest and possibly the greatest investor in the world today.

Yet, in his own letters to his shareholders he has talked about his mistakes over 165 times, with the acquisition of Dexter Shoes being the largest, driven by overconfidence, which goes to show that no one is above making such mistakes.

Failures and losses are part of the game. But what matters at the end of the day is how investors recover from their missteps and moved forward armed with a wealth of knowledge than can only come from experience, as can be seen from the lessons learned by the legendary investors mentioned in Michael Batnick’s new book.

 

 

Note: This note is based on the informations shared in the book, " The World's 99 Greatest Investors" 

_______________________________________________________________________

10-Days Certification Course on "Crowd Psychology" 

(Read online 5 minutes a day)

Understand how people think, feel & act in groups — and transform your leadership, strategy, and decision-making.

 

🧠 You Will Learn:

•  🧍‍♂️ Crowd behaviour: how they think and act together
• 😨 How crowd emotions turn into crisis
• 🙌 How to better handle crowds and large social gatherings
• 🎯 What influences a crowd and how it’s shaped
• 🗣️ How great leaders and social groups shape crowd thinking
• 🚫 How not to get trapped in crowd behavior
• 💡 Discounted price of just Rs 29 (get refund if you do not like course) 

 

Enroll now 👉 Click here 

 

📘 This Course Includes:

• 🧩 10 chapters only (English)
• 📲 1 chapter delivered every 3 days via WhatsApp/Email
• ⏱️ Just 15 mins/day to complete the course in 30 days (Total ~1.5 hrs)
• 📱 Learn on Mobile/Desktop
• 🏅 Certificate of Completion on Day 30

 

💰 ₹ 2999 pay now Only! 29 RS🔥🔥🔥🔥
 

👥 Who Should Attend:

📈 Stock market investors, 🎓 Students, 👨‍💼 Team Leaders, 🎯 Marketers, 🏢 Business Owners.

✅ Real-life Examples | Designed for Busy People | Certificate for your LinkedIn/Resume

 

🔗 Enroll now 👉 Click here 

 

100Bagger: Eagle Post

Aimed at compounding knowledge and wealth, we bring to you best stories and resources every month handpicked by our 100 Bagger team.

• Bonus: You'll also receive a FREE COPY of our latest ebook, "MARKET CYCLES: HOW THEY WORK AND HOW TO PROFIT FROM THEM"
• E-copy of Highlighted 45 Page Detailed Naval Ravikant Interview
• Book Summary "The 4-Hour Work Week"