8 powerful investing tips we can learn from one of the smartest traders in the US
Most great wealth is acquired by building giant corporations. Think of Bill Gates and Microsoft, Jeff Bezos and Amazon, Sam Walton and Walmart, or in the past Henry Ford and Ford Motor Co. Whereas Jay Gould, who will be the subject of this article, is one of the few people besides Buffett who achieved this by being a great investor. Here are 8 things we can learn about him.
The Wall Strett Stock Market
Jason Gould was an American railroad tycoon and financial speculator. His sharp and often unscrupulous business practices made him one of the richest men of the late nineteenth century. Gould was an unpopular figure during his lifetime and remains controversial. With the profits he made on the telegraph giant Western Union, the transcontinental railroad Union Pacific, and other leading companies, Gould amassed enough wealth to place him at the top of contemporary lists of the richest Americans of all time.
What can we learn from Gould, who was worth more than $80 billion when he died 130 years ago?
Get the facts - Gould devoured newspapers, credit reports and tips. He traded gossip all day and after dinner at home with his family, he went to hotel bars at night to trade more information. The current Gould would follow Twitter, reddit, MarketWatch and other sites, looking for important information and gauging the mood of the market.
Be patient - Gould said the one thing that is not abundant on Wall Street is patience. He failed in his first attempt to buy Western Union. But he kept his eye on it and eventually managed to buy it at a bargain price.
Know the numbers - Gould wasn't just investing with ink. If he bought a railroad, he knew what price it was paying workers, what it was paying for coal, and what its competitors were charging customers. Before an investor puts money into a company's stock, he should do his due diligence because thin research won't get him far.
Read everything, not just stuff about investing - Gould read the classics. He read Dickens. He read history. His broad knowledge gave him insight that helped him stay calm.
Go against the tide - Gould made his first fortune buying railroad bonds that no one else wanted, at 10 cents on the dollar.
Keep some cash - The Panic of 1873 started one of the longest recessions in U.S. history. Gould lost his fortune at that time. But he always had something left over. When stock prices got ridiculously cheap, he bought them.
Beware the Short Squeeze - The trouble with shorting stocks is that the potential losses are endless. Gould sometimes went broke, but more often than not, he took the other side, buying stocks that were heavily shorted, swallowing all the stock, and charging top dollar when the sellers had to return the borrowed shares. Of course, those who shorted Gamestop or AMC Entertainment already know this lesson.
But the most important lesson we can learn from Gould is that investors should watch what people do, not what they say.
Summary
Whatever we think of Jay Gould, his advice is still relevant 130 years after he died. Some of them will be more useful than others, but in general they can be summed up in a few sentences. An investor should find out as much information as possible about the company in which he or she intends to invest. Thorough analysis is the foundation of true success. It is also a good idea to keep some cash on hand in case an investment opportunity arises in the market.
DISCLAIMER: All information contained herein is for informational purposes only and is in no way an investment recommendation. Always do your own analysis.
