Lessons From the Greatest Investor Ever (And It’s Not Buffett)

great-investorMost of the great “investor” wealth you see today (including Warren Buffett’s) is as attributable to the “business” of investing as it is to investing itself.

A business is started to manage money. The business’ goal is to accumulate large sums of money to manage. A percentage fee is then earned on money under management; additional bonuses (frequently huge) are earned based on investing performance.

When I think of investing, or an investor, I think of someone like you or me: An individual who invests his or her money through a brokerage account. Our money isn’t made through the business of managing money; it’s made by allocating our savings to appreciating and income-producing assets.

With that in mind, the greatest investor whoever lived is not one of today’s billionaire money managers. It’s Henrietta Howland “Hetty” Green.

Yes, Hetty Green – a woman, and an extraordinary one at that. Green lived and invested in the later half of the 19th century and the early years of the 20th century – a time when precious few women were sufficiently confident to challenge men in a man’s world.

Green was certainly no shrinking violet. She was independent and pugnacious – characteristics that no doubt contributed to her investing prowess. At the time of her death in 1916, Green’s net worth was estimated to be $100 million (roughly $2.2 billion in today’s dollars). This, she grew from a $5 million inheritance.

Green’s investing habits and strategies are timeless. They are as useful today as they were 125 years ago. You’ll find her most insightful habits and strategies below.

4 Lessons from the Greatest Investor Ever

Frugality

Keep expenses to a minimum; you can’t invest overhead.

Though wealthy, Green conducted much of her business in the back office of a local New York City bank, for which she paid no rent. Green was frugal to the extreme: She lived in dingy apartments and ate the most basic sustenance (onions and cheap meat pies). She also never borrowed money.

That said, her lifestyle afforded tremendous freedom to move on investment opportunities when they  arose. Most investors are bound with debt and costly possessions. You can’t move on something if you lack the freedom to move.

Contrarianism

Liquidity enabled Green to profit from every panic, using each one as an opportunity to consolidate her holdings.

On Sept. 18, 1873 (the Panic of 1873), the stock market crashed. The following morning, Green appeared on Wall Street and placed large buy orders when everyone was selling. In no time, she reaped a bonanza when stock prices recovered.

Thirty-four years later, in the Panic of 1907, New York City officials approached Green with hat in hand, seeking loans to keep their broke city afloat. Green obliged, lending the city $1.1 million in exchange for short-term revenue bonds at 5.5% interest (Think Warren Buffett’s deal with Goldman Sachs in 2008).

Conviction

When Green was certain in her analysis, she pounced.

In 1886, a group of New York investors sought control of the Georgia Central Railroad (GCR) in order to liquidate its assets. Green discovered the plan and bought GCR shares at $70. The priced quickly climbed to $100. Green could have booked an easy profit, but she knew the shares remained undervalued, so she held out for full value.

The New York investors approached Green and offered $115 a share; she demanded $125. The New York investors countered with another offer: If Green would wait, they would meet her demands.  Green scoffed and upped her price to $130. The New York investors immediately settled for $127.50 a share.

Patience

Green rarely traded. She would buy and hold investments for years, even decades.

Green considered herself a long-term investor, as opposed to a short-term speculator. Green’s investing modus was to buy assets on the cheap, rarely sell, and reinvest cash flow. Her investment goals were modest – a 6% annual return on investment. But 6% compounding over time can lead to great wealth, as Green proved.

You could say that Hetty Green is the mother of value investing, whereas Benjamin Graham is the father. Just like you’d be wise to take paternal investing advice from Graham, you’d be equally wise to take maternal investing advice from Green.

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Published by Wyatt Investment Research at