People like Warren Buffet and Peter Lynch have lived long, prosperous lives thanks to their talented approach to trading. You can learn a lot about their skills by finding out how they live and work.
We’ll talk about five of the wealthiest and most inspiring traders we know – and what they can teach us about trading. Pay attention, take notes, and try to inspire yourself to become better than you were yesterday. You may be on this list one day!
Warren BuffettYou can’t talk about successful traders without mentioning Warren Buffett, one of the most famous businessmen in history. He’s worth more than 100 billion dollars today, but he began with nothing but a few dollars and raw talent.
Early lifeHis story began in 1930, during one of the biggest financial crises in American history. As fate would have it, he was the son of a stockbroker.
Young Warren had no trouble with math – he was actually very good at it. Some believe his success comes from his mathematical abilities.
Of course, he didn’t start trading stocks right away. Warren Buffett took advantage of his math skills during his early childhood, realizing he could wholesale buy packs of Coca Cola then sell the cans at a recycling plant. That was the first of many great ideas – something that tells us how valuable having an entrepreneurial spirit is!
His first stock tradeAlthough Buffett made very little money by recycling cans, that didn’t stop him from reinvesting and making a profit. At eleven years old, he took his Coca-Cola recycling profit and invested shares in a utility company.
Both the investment and profits were minimal: he only had enough to buy two shares. Nevertheless, Warren Buffett claims he learned a lot by doing that – something that money can’t buy. Learning about trading early on is a must. Warren developed his business philosophy through his early trading experiences. It boils down to this: patience is a virtue.
How did he find out about the importance of being patient? By losing money, of course. He bought shares at $38, but they quickly plummeted to $27 per share.
That devastating first blow made him very nervous, but he was wise enough to hold on. He waited until the same shares reached $40 before selling. (If he held out for longer, he actually would have sold those same shares for $200, but hindsight is 20/20.)
You have to be patient when trading stocks, no matter how stressful it is. Warren Buffett made billions by being more patient than his competition.
What’s Warren Buffett doing now?This incredibly successful trader owns a portion of Berkshire Hathaway, an investment fund. This firm has a diverse portfolio, including Amazon, Apple, and Google stock.
Many call Buffett something of a modern-day oracle, but he often maintains that he’s just an ordinary man who has had his fair share of losses early on. He also made a few bad decisions later in his career.
Nevertheless, after a long life dedicated to trading stocks and bonds, he has made billions – proving he has had more wins than losses. The foundation of his fortune is two-fold: patience and calculation. The result of both these characteristics is a cold approach that leaves emotion outside of his investment firm.
Warren Buffett is well past retirement age, but continues to live modestly and work on various projects. He has signed The Giving Pledge, meaning he’ll donate half his fortune to charity after passing away.
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Let’s find out how he made close to 9 billion dollars and became one of the most famous financial traders.
Early lifeGeorge Soros was born in 1936 to a middle-class family living in Budapest. Since his early years were spent on the brink of World War II, George changed his last name from Schwarz to Soros to evade Nazi persecution.
Unlike Warren Buffett, nobody in his family had any ties to the financial world. Nevertheless, it’s interesting to note that Schwarz means “foundation” in Hebrew. It all takes a very ironic twist when you consider Soros is against market fundamentalism; he views financial markets as something strictly social which are affected by and responding to events in society.
Because of that, Soros is against government intervention and influence when it favors wealthy people over the rest of society. Despite his moral beliefs, he’s well known for his aggression and almost carelessness regarding finances and transaction legality.
First jobGeorge Soros didn’t start as a stockbroker, but as a traveling salesman. After working in sales for a while, he moved to New York and began what would then become a long and successful trading career. His first job was at FM Mager, an investment firm.
In 1967, he founded a hedge fund, Eagle – a firm that quickly attracted many investors due to his fame and fortune that came from international arbitrage deals. Six years after starting Eagle, Soros decided to go double-or-nothing and founded another hedge fund called the Double Eagle Foundation, another raging success.
By 1980, 13 years after Eagle’s inception, Soros had $100 million to his name and directed a hedge fund called Quantum.
Later yearsSomething is fascinating about Soros’s trading career: he never had any significant losses. Sure, he lost a little money in a fluctuating market – but he always came out on top, which almost no one can say about themselves.
And some would agree why: Soros has a very aggressive financial strategy using somewhat unethical methods. Other investors call Soros an extremist: someone who, out of sheer aggression and strong positions, wreaks havoc in the market.
There are many black episodes in George Soros’s trading history. His radical methodology almost destroyed the Bank of England after shorting the British pound in 1992 during a 10-billion pound contract, which netted him a one billion pound profit – in one day!
Financial historians coined the term “black Wednesday” for that moment in history. That one-day transaction forced the British central bank to abandon several rules and regulations and create a financial overhaul that affects markets today, 30 years later. Nowadays, Soros works as an investor and dedicates himself to charitable work and philanthropy.
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Early LifeTempleton went to Yale and Oxford, then upon graduating, started a career in investment law. However, it quickly became apparent that law was not his calling.
After working as a lawyer for a while, he founded Dobbrow and Vance, an investment firm, in 1940. He switched his focus from law to finance and dedicated himself to investing and trading full-time.
Fourteen years later, in 1954, Templeton decided to start his second project: the Templeton Growth Fund. Many believe that moment cemented Templeton as the forefather of international stock trading.
The secret to Templeton’s successSir John Marks Templeton had one strategy: finding low-valued securities and investing in them. Most of these financial instruments cost as little as $1, but their price then grew to hundreds, thousands, and more.
Simply put, this trader went for undervalued securities that had potential. He didn’t buy cheap stuff for no reason. Because of this strategy, Templeton always made a profit and rarely had any losses, similar to Soros. You can do the same if you follow the right signals.
At a certain point in time, anyone who invested $10,000 in his firm would eventually get $2 million, benefiting from an ongoing annual 14.5% investment return. That figure is very high for the stock market.
Lessons from TempletonBeginner and veteran traders can learn a lot from Sir John Marks Templeton. Similarly to Buffett, he developed a work philosophy from his long career, which is useful to any trader:
Templeton advises not to follow the crowd – Don’t pursue popular instruments, but focus on what you believe has real income.It’s fundamental to note markets are volatile, and you can make a profit with almost any asset if you time it right.But remember that you will lose from time to time, and you should take a loss as a learning opportunity.It’s impossible to know everything. Nevertheless, being a market pessimist always helps bring a profit.If you like these financial aphorisms, you can learn about the 80/20 rule we have explained before.
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Most of his work takes a day to complete. You can do the same after learning the basics. Cohen made more than 9 billion dollars thanks to his trading strategy. Some consider him one of the most influential traders today.
Early lifeSteven Cohen was born in 1957 in the US. He graduated from the University of Pennsylvania with a degree in finance. After college, he became a trader at a brokerage company. That gave him a certain degree of liberty and allowed him to learn more about the financial markets in real-time.
Cohen himself claims that working at a brokerage company was a necessary stepping stone to becoming a successful trader. He also explains how important it is to work by yourself after a while. That’s why he became an independent trader after 14 years there.
He founded SAC Capital Partners, his investment firm, in 1992. His work as CEO gave him an extra edge and even more experience.
Recent yearsNowadays, he’s the CEO of Point72 Asset Management, as his previous firm is now defunct. He manages close to $24 billion and leads one of the most stable and profitable firms.
Steve Cohen’s trading strategy is truly unorthodox. He shies away from long-term investments and goes for short-term gain, which may seem counterintuitive. He also doesn’t care about the company he chooses. Instead of doing that, he looks at daily charts and develops a strategy. Some believe he’s more of an aggressive scalper than an investor.
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Early LifePeter Lynch was born in 1944. Although he’s a billionaire now, he had a rough start during his childhood. He started to work at ten years old after his father passed away. His first job was at a golf course.
Lynch often explains that early experience gave him the strength to become a billionaire. Spending time with successful and wealthy people helped him become a talented trader. He learned a lot about the financial world from his work at the golf club.
First tradeOnce he made $1,000, he decided to buy a small stake in an airline company. That small sum turned into $10,000 almost overnight – which gave him the first taste of the rest of his life. He became a financial analyst in 1969. He dedicated more than a decade working there before becoming independent.
Trading principles from Peter LynchLynch believes in the following principles to become a successful trader:
Create a clear strategy and work according to itEmotions are the enemy of an investor. You can only earn with a cool, clear headIndividual investors are more efficientThese principles helped Lynch accumulate a lot of capital and become one of the most influential personalities in financial history.
ConclusionAs you can see, most traders started with little money, but worked hard to get to the top. They used every talent they had (for example, Warren Buffett exploited his math skills) to get an edge against their competitors. You can do the same! Learn how to get there by checking our other articles on the blog.
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