George Soros Investing Strategy

George Soros was born in Budapest in 1930. He moved to the United Kingdom in 1947. Following his studies at the London School of Economics, he began his career as a stockbroker in New York. Soros founded Soros Fund Management in 1973, which would go on to become one of the most successful hedge funds in history. He bases his analysis on macroeconomic and fundamental factors to locate assets that are incorrectly priced and will trade long and short if he can.


His audacious investment decisions contributed significantly to the hedge fund's success. In his hedge fund, he uses the global macro strategy. This strategy involves making numerous one-way bets on stocks, commodity prices, and currency rate moves. George Soros is a short-term speculator. He makes massive, highly-leveraged bets on the direction of the financial markets Another way to picture Soros' investing success: If you had invested $1,000 with him in 1969, you would have earned a cumulative annual return of 30%, or about $4 million by 2000. Talk about powerful investing returns!


George Soros' forex experience enabled him to amass a fortune through currency market speculation. On September 16, 1992, George Soros made history by "breaking" the Bank of England. He accomplished this by short-selling $10 billion in pound sterling. Soros borrowed money in British currency and converted it to German currency. He predicted that the pound would lose value. His prediction was correct, and the bet paid off, netting him a tidy $1 billion that day.


During the Asian financial crisis in 1997, Soros allegedly made a large bet against the Thai baht. It is estimated that he bet $1 billion of his $12 billion portfolio on the currency imploding, which occurred when the Bank of Thailand ran out of ammunition to support its currency and fend off short sellers.


In 2013 and 2014, Soros made another large bet against the yen. These bets netted Soros another $1 billion. Soros was aware that Japanese Prime Minister Shinzo Abe was implementing extensive monetary easing in order to kick-start Japan's stagnant economy. The easing lowered the value of the yen. Simultaneously, Soros was long the Nikkei, Japan's stock market. During Soros' wager, the yen fell by about 17%, while the Japanese stock market rose by about 28% before falling back. In 2013, the Soros family investment fund managed over $24 billion and earned a 24% return.


In effect, one of George Soros' tactics is to try to sway governments, policymakers, the banking system, and anything else he can to steer his pre-selected market in that direction. He would release information to the financial press, and small investors would then jump on board, fueling the directional trend.


Although Soros made several accurate predictions about the stock market, not all of his bets paid off. For example, while he correctly predicted the 1987 global stock market crash, he was incorrect in his prediction that Japanese stocks would be the hardest hit.


George Soros has his reflexivity theory which he derived from social science. The theory states that the behavior of individuals produces an outcome, and that outcome influences their behavior, which in turn reinforces the outcome. This is in effect a self-fulfilling prophecy and George Soros applied this to the financial markets. He was adamant that financial markets are always biased in one direction or another. His reflexivity theory is that financial markets can influence the events they anticipate, which explained why financial markets appear to anticipate events correctly.



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