How Isaac Newton Lost $3 Million Dollars in the “South Sea Bubble” of 1720

 

Isaac Newton is one of the smartest people to ever live in our planet. But there's a big difference between being a smart physicist and smart investor.

Back in the spring of 1720, Sir Isaac Newton owned shares in the South Sea Company, the hottest stock in England. Newton dumped his South Sea shares, pocketing a 100% profit totaling £7,000. But just months later, swept up in the wild enthusiasm of the market, Newton jumped back in at a much higher price - and lost £20,000 (or more than $3 million in [2002-2003's] money. For the rest of his life, he forbade anyone to speak the words 'South Sea' in his presence. 🤣🤣

Newton obviously wasn't a dumb person. He invented calculus and conceptualized his three laws of motion. But this little episode shows that he wasn't a smart investor because he let his emotions get the best of him, and got swayed by the irrationality of the crowd.

South Sea's stock price in 1720

Sir Isaac Newton's perspective on stock markets after loosing 3 million us dollar. 🤣🤣