Don’t Make the Same Investment Mistakes Isaac Newton Did! (2024)

Don’t Make the Same Investment Mistakes Isaac Newton Did! (1)

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Aditya Birla Sun Life Mutual Fund (ABSLMF) Don’t Make the Same Investment Mistakes Isaac Newton Did! (2)

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Published Jun 6, 2023

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Did you know there is an interesting story on investment behaviour with renowned scientist Isaac Newton at its centre?

The year was 1720. South Sea Company was among the hottest stocks in England and Isaac Newton had made over 100% returns on his investment in the company. As their stock prices continued to appreciate, Newton, with an eye on more, invested an even larger amount in the same company. Unfortunately, the stocks collapsed a few months later and Newton lost his money, including the previous profits.

Herd Mentality and Speculations

Despite being one of the greatest minds of his time Newton acted out of herd mentality – behaviour not uncommon among stock market investors. Throughout history such fads have held investors in their grip. Be it the Tulipmania of the early 17th century, the dot-com boom of the late 1990s, or even the recent Crypto market bust.

Investment fads attract investors solely based on the possibility of exorbitant returns on a particular asset class in a relatively short period of time. Average retail investors enter at a time when the prices have already run high, and make decisions without knowing the fundamentals of the company, only to lose their money in a matter of days. This is counter to the rationale of investing for long-term wealth creation.

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Putting all Your Eggs in One Basket

Diversify your portfolio. Newton had a significant portion of his wealth tied up in the South Sea Company, and when the company's stock price plummeted, he suffered significant losses. Diversifying your portfolio across different asset classes and industries can mitigate risk and protect your investments.

Emotions over Rationale

Don't let emotions guide your investment decisions. Newton was a victim of the "fear of missing out". When the South Sea Company's stock price began to soar, he bought in because he didn't want to miss out on potential profits. He then held onto his shares even when the stock price began to decline, hoping it would rebound. Emotions can cloud your judgment and lead to poor investment decisions. It's important to have a solid investment strategy and stick to it, regardless of market fluctuations.

Newton may have been unable to resist the temptation, but you can learn from his mistakes. So, keep calm and invest wisely; avoid market fads, instil discipline, align your investments with your goals, and diversify your investments across asset classes.

The views expressed in this article are for knowledge/information purpose only and is not a recommendation, offer or solicitation business or to buy or sell any securities or to adopt any investment strategy. Aditya Birla Sun Life AMC Limited (“ABSLAMC”) /Aditya Birla Sun Life Mutual Fund (“the Fund”) is not guaranteeing/offering/communicating any indicative yield/returns on investments.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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KRISHNAN N NARAYANAN

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Don’t Make the Same Investment Mistakes Isaac Newton Did! (2024)

FAQs

Did Isaac Newton invest in the stock market? ›

On June 14, 1720, Isaac Newton made a bold move, investing £26,000 into South Sea Company shares at the steep price of about £700 per share. This uncharacteristic decision marked a significant departure from his typically prudent approach to investments. Unfortunately, Newton's timing proved costly.

How did Isaac Newton solve problems? ›

One of Newton's most notable contributions to problem-solving was his development of calculus. Calculus is a powerful tool used to solve various mathematical problems. Newton developed the fundamental principles of calculus in the late 1600s, and it has since become a cornerstone of mathematics.

What did Isaac Newton disagree with? ›

Scholars have generally concluded that Newton's heretical beliefs were self-taught, but he may have been influenced by then-current heretical writings; controversies over unitarianism were raging at the time. As well as rejecting the Trinity, Newton's studies led him to reject belief in the immortal soul.

What are some problems Isaac Newton faced? ›

First, note that he lived through a great plague in London, and was allegedly prone to anxiety and had more than one nervous breakdown. He was at odds with his peers, such like Gottfried Leibniz, who is argued to be a progenitor of some of the same calculus as Newton.

What is Newton investment? ›

Newton is a global investment management firm, founded in 1978 and owned by BNY Mellon. Our story is one of purpose – to improve people's lives by investing in a way that strives to deliver attractive outcomes to our clients and to help foster a healthy and vibrant world for all.

What did Isaac Newton do for money? ›

Newton was also wealthy by the standards of the day. Master of the Mint was a lucrative post. His position at Cambridge had paid about £100 per year; by contrast, his earnings at the Mint, including both a salary and a fraction of the Mint's production of coins, averaged close to £2000 per year.

Who was Newton's wife? ›

Personality. Although it was claimed that he was once engaged, Newton never married.

What 3 things did Isaac Newton do? ›

New Scientist once described Isaac Newton as “the supreme genius and most enigmatic character in the history of science.” His three greatest discoveries — the theory of universal gravitation, the nature of white light and calculus — are the reasons why he is considered such an important figure in the history of science ...

Why was Isaac Newton so successful? ›

Isaac Newton was one of the world's great scientists because he took his ideas, and the ideas of earlier scientists, and combined them into a unified picture of how the universe works. Isaac explained the workings of the universe through mathematics. He formulated laws of motion and gravitation.

Do scientists believe in God? ›

“Looked at the other way around,” Ecklund writes, “only about 9 percent of scientists say they have no doubt that God exists, compared to well over 60 percent of the general public.” As far as religious practice is concerned, “about 18 percent of scientists attend religious services at least once a month or more, ...

What did Isaac Newton think of Jesus? ›

Newton believed that Christ was the Messiah and the Son of God.

Why didn't Newton marry? ›

1> Dedication to Work: Newton was deeply devoted to his studies and research. He was intensely focused on his scientific pursuits, often working long hours and becoming engrossed in his projects. Some believe that he prioritized his work over personal relationships, including marriage.

What is Newton's first law? ›

Newton's First Law of Motion (Inertia) An object at rest remains at rest, and an object in motion remains in motion at constant speed and in a straight line unless acted on by an unbalanced force.

What is the math problem of Isaac Newton? ›

Newton's minimal resistance problem is a problem of finding a solid of revolution which experiences a minimum resistance when it moves through a hom*ogeneous fluid with constant velocity in the direction of the axis of revolution, named after Isaac Newton, who studied the problem in 1685 and published it in 1687 in his ...

Why is Newton called Sir? ›

British scientist Isaac Newton is commonly referred to as "Sir" Isaac Newton because "Sir" is the common title for men who have been knighted in England. Newton was knighted by Britain's Queen Anne in 1705, during the Queen's visit to Trinity College, Cambridge (where Newton worked).

Did Albert Einstein trade stocks? ›

Few people are aware that Albert Einstein put a significant portion of his Nobel Prize money in stock markets in 1921.

Who sold the world's first stock? ›

Euronext Amsterdam website. Documentation about one of the oldest shares in the world, issued by the Dutch East India Company, 1602, which has disappeared from the Amsterdam City Archives.

Who invented the idea of stocks? ›

Who Invented the Stock Market? The first stock exchange in the world was created in Amsterdam when the Dutch East India Company was the first publicly traded company. To raise capital, the company decided to sell stock and pay dividends of the shares to investors. Then in 1611, the Amsterdam stock exchange was created.

Did Isaac Newton invest in the South Sea Company? ›

Newton himself owned nearly £22,000 in South Sea stock in 1722, but it is not known how much he lost, if anything.

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