George Soros: Chaos Creates Opportunity

Here are Soros’ 5 rules for smart investing:

1. Take advantage when markets turn chaotic: Chaos leads to market   opportunities. When it strikes, detach from your emotions. Invest logically in these times. Focus on the market prices and the value of underlying assets.
2. Preserve Capital: Only take smart risks. Invest your capital in things you truly understand. It’s okay to sit on the sidelines. Take your time, research, and invest in opportunities you understand or feel you bring a unique perspective to.
3. Don’t over-diversify, stay focused: Focus on a handful of strong companies that have the capacity to produce huge profits. It’s much easier to identify one superstar than 100.
4. Keep quiet about your investments: What others think is meaningless. Form your own views and have the restraint to not broadcast your moves to everyone else.
5. Fortune favors the brave: Do your homework and due diligence. However, once you’ve reached a logical and positive conclusion about a company, dive in. Don’t tip-toe. Not committing enough is one of the greatest mistakes an investor can make.

Conclusion:

Markets have a tendency to react to investor emotions. Resist the urge to fall into this trap. Use logic and research instead to come to informed decisions about investment opportunities. Once you’ve done your homework and feel good about a company, jump in. 

Currently, the 2020 market landscape is volatile. To navigate it, one must be able to step back from their world view and emotions. These two factors almost always lead to an incomplete picture of the market. Instead, have the discipline to do research and be mindful of how your own emotions are impacting that process. 

Soros is a master at utilizing chaos to his gain. In 1990, Soros patiently waited as Britain’s inflation rate soared, its interest rate hit 15%, and the economy headed towards a crash. His timing was exemplary. Soros’ fund sold $10 billion pounds short, flooding the market, and profiting a billion dollars from this one trade alone. His only regret: not betting more. Learn from him. 

Soros doesn’t merely take advantage of market volatility, he relies on it. Currently, Soros has publicly stated that he believes the market is in a bubble. Bubbles are driven by investor emotions and greed. To invest like Soros it’s important to watch the markets closely, patiently, and time your entry and exits well. This harkens to our Investor Commandment 6: “Be Patient, Be Bold.” Don’t allow yourself to become subject to the greed or fears of other investors. Instead, detach from others, watch the markets and pounce at a logical time.