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The genius who bought back in

How to own a piece of growth without betting what you can't lose · 14 min

In 1720 Isaac Newton sold his South Sea shares at a profit, then bought back in at twice the price, with nearly everything he had. Why, from 1990 to 2020, most single listed shares worldwide did worse than safe lending while shares as a whole grew, what Brazil's day traders found out, and three questions to ask before you own anything.

Takeaways

  • In 1720 Isaac Newton sold his South Sea shares at a profit, then bought back in at about twice the price and, by September, had essentially all his financial wealth in that one company. When it collapsed he lost at least ten thousand pounds.
  • In a study of more than 64,000 listed shares worldwide (1990–2020), most did worse than safe one-month US government lending, and fewer than three in a hundred companies created all the net wealth; yet shares as a whole, across 35 markets since 1900, grew about 5% a year after inflation, in dollars. Owning pays mostly through breadth, and stays bearable through time and size, and is never guaranteed.
  • This week: one piece, three questions: how many baskets, when will I need it, and what if it halves?

Chapters

  1. Twice the price0:17
  2. Picking the winner2:28
  3. The whole basket4:11
  4. Two first pieces7:35
  5. Hear it done8:47
  6. Build yours10:01
  7. The answer11:50

References

  1. Odlyzko, A. — Newton's financial misadventures in the South Sea Bubble(2019)
  2. Odlyzko, A. — Isaac Newton and the perils of the financial South Sea(2020)
  3. Bessembinder, H., Chen, T.-F., Choi, G., & Wei, K. C. J. — Long-term shareholder returns: Evidence from 64,000 global stocks(2023)
  4. Chague, F., De-Losso, R., & Giovannetti, B. — Day trading for a living?(2020)
  5. Dimson, E., Marsh, P., & Staunton, M. — UBS Global Investment Returns Yearbook 2025(2025)
  6. Cambridge Judge Business School — Report: stocks have far outperformed over the past 125 years(2025)
  7. Dimson, E., Marsh, P., & Staunton, M. — How long is long term?(2018)
  8. Nippon.com — Nikkei index sets first record high since 1989(2024)
  9. U.S. Securities and Exchange Commission, Investor.gov — Asset allocation and diversification