Paul Tudor Jones is a highly successful investor who is now a legend in the hedge fund industry. Although the following investment advice was given in the late 1980s, you’ll find that they are still applicable today because in today’s market, trend following doesn’t work (Paul is a contrarian investor, which works perfectly in secular bear markets when the market is moving inbetween a range). As a result, Paul still manages a $17 billion hedge fund, while many of his fellow investors in the 1980s who were trend followers are now history.
- Be contrarian at when sentiment and market price actions becomes extreme.
- Liquidate half of your position below a new high (if you’re long) or above a new low (if you’re short). By liquidating a part of your position, you’ll wisely unload some risk because no one knows if the market will make the new high or new low.
- Proper risk management, the most important skill a good investor can learn, is far more important than a successful investment model.
- Stop loss orders are especially useful to catch a market bottom/top. Don’t worry if you get stopped out: keep initiating the position until you hit the jackpot.
- Never initiate a position before a piece of news comes out.
- Get out and clear your head if your position is getting shredded.
- Don’t get cocky. Disaster is just around the corner.
- Because markets don’t move during 80% of the time, save your patience and money for the other 20%.
- Emotional attachment to a market/investment is the quickest way to the poorhouse.
- When the market views of highly successful investors differ from yours, wait before making a long/short commitment. Triple check your analysis, wait for a catalyst to either prove you wrong or right, and then initiate a position accordingly.
- The markets, due to computer trading, move sharply when they do.
Some of these tips are a bit above my head, but I agree about proper risk management!
Good advice. Hey, what do you think about the LIBOR scandal?
These are great tips to invest by. I especially agree with 5 and 7 and also constantly have to ask myself if I’m emotionally investing. Thanks for the reminder!!!
I think number 1 is the most useful. Too many people buy on dips only for it to dip even more.
Good advice! And I’d love to win the Amazon gift card!
great post
how can we curb our emotions when it comes to investing, this is a challenge for me
Emotional attachment can definitely mar your judgement– you need to be objective!
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I’m so glad I found your blog… and I’m getting quite the education. I’ve been putting it off for a long time but I’m starting to get excited about investing now. I already know that the one I’m going to have some trouble with is # 9. It’s just in my nature but I’ll have to fight it.
Katharina angelsandmusic[at]gmail[dot]com
Glad that I can help!
I like this one = Emotional attachment to a market/investment is the quickest way to the poorhouse. Important to be detached.
GLTA – thank you
Paul seems like a sharp guy.
Paul seems like a smart fellow.
great advice!