Could you imagine the genius who discovered gravity, propounded the laws of motion and even created the calculus, could ever commit an error, and that too a big one? Yes, we¡¯re talking about Sir Isaac Newton.
While there¡¯s absolutely no doubt how genius he was and the glorious scientific career he had, it probably turns out that stock trading wasn't his cup of tea.
In the year 1720 in England, a speculative mania was brewing up in the South Sea Company's stock, which was the hottest stock in England at that time. This market craziness was triggered after this company managed to bag a contract to take over Britain¡¯s national debt. Certainly sounds huge, right?
So, supposedly this company underwrote the government's debt worth a whopping 30 million Euros, in return for getting 5% interest. And no matter how illogical or impossible it may sound, but the company¡¯s stock price went up 10 times immediately after this news spread.
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And right when all this madness was revving up, Isaac Newton sold his shares in the South Sea Company and raked in 7,000 Euros. But he wasn't exactly proud of this decision, as he noticed that it wasn't a good idea to dump the shares back then, as prices were still exponentially rising!
So, Newton then did a crazy thing- he jumped back and again brought the stocks, But this time, the stock mania had already reached its peak. Investors who had been highly enthusiastic until this point had started realizing that maybe this is it, and the market is beginning to cool down, and prices tempered. Later in 1721, Newton saw his entire initial gains wiped out, and he lost a whopping 20,000 Euros in the sell-off, which in today¡¯s terms turns out to be millions of dollars.
All in all, just like many people who even today fail in the stock market, the genius Sir Isaac Newton too, followed the herd mentality in an area which wasn't his strong suit, i.e. the stock market, and hence ended up losing a lot of money!.
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