What Makes An Investor Great?

Many people say that spreading your risk is the key to success in the investment world. But is that really the case? There are plenty of investors, namely, who made a name for themselves by betting big on huge positions. Georges Soros is one of them.

Soros’ fund went short in September 1992 on more than 10 billion dollars worth of British pounds to play on the fact that the British government did not want to raise its rates to comparable levels within the European Exchange Rate Mechanism. The UK ultimately pulled out of the European mechanism and the pound dropped in value.

The estimated gains for Soros’ fund amounted to 1 billion dollars; an investment that got him the nickname ‘the man who broke the Bank of England’. Concentration can help you realize strong gains and diversification can help you protect your capital. In reality huge gains also indicate very real and enormous risks. Betting big is not for everyone, as a consequence. If you are still interested, these are Soros’ 2 lessons:

Timing Is Everything

If you bet big, timing is everything. Timing the entry of your trade well makes that you can still make money when your trade turns sideways. Hedge fund manager Scott Bessent once said:

If I learned one thing from Stan Druckenmiller – the trader behind the famous short on the British pound – is that everything revolves around timing. If his timing was off, he rarely lost money. His timing was that good.

Be Prepared

Another tip is: be prepared for the worst. Despite Soros’ and Druckenmiller’s conviction they were always aware of the fact that they could take the losses and they always had an exit plan at the ready.