George Soros

Was he one of the world's greatest investors?

George Soros will always be remembered for his almost $2 billion profits made when he shorted the British Pound. Or making over 60% yearly returns on his Quantum Fund with almost $4 billion under management.

Staggering returns by any stnadard! But not too many seem to recall George Sosros's horrific 60%+ losses in his funds when he was caught in the 1987 crash!

In fact, Soros even admits that he is rarely more than half right!

His secret?

"I simply make a lot of money when I am right and ...

Lose as little money possible when I am wrong!"

Soros investment principles were different to many fund managers today. Not for him was the systematic, mathematical approach to the markets. He liked to look at them practically.

Soros's basic principle was to view a country. He would look at their currency or stock market and try to see if the current trend was wrong.

If he believed the current trend had "really overshot" (as trends usually do) then he would go the other way. He would take the contrarian view!

What are the advantages of adopting this kind of contrary approach?

When a trend that has been present for some time does over-shoot it is only a matter of time before it reverses. Common sense?

With more and more trend followers simply following the trend there will come a time when there are no more buyers in a bull trend or sellers in a bear trend. When this point is reached the trend will sharply reverse!

The person who had the "guts" to go against the trend will make a killing!

BUT, whilst trends do over-shoot, they can overshoot by a much bigger margin than you could ever possibly imagine. Many trends have really overshoot and many, many months before the market had the chance to realize it!

Take a look at the 1999-2000 NASDAQ. Was it overbought? YES! By a long, long shot! BUT, trying to predict this and betting against that trend during this over blown bubble, would have resulted in catastrophic losses!

Losses, Soros himself was not immune from. Many investors bet a number of times trying to predict the end of the stock market bull/bear trends and ...

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