5 Things I Learned From Contrarian Investor Hetty Green

Investing is a lot like dating. Low confidence can keep you out of the market. A good way to gain confidence is to learn from those with experience. 🙂

When you do an internet search for “famous investors” you might see a list of highly experienced individuals. Some are dead. Most are alive. But despite being from different backgrounds, all the investors from the search result appear to have one thing in common.

None of them are wearing hats. A piece of headwear can tell a lot about someone’s personality. However, there is one famous investor that didn’t come up in my search results but does like to wear hats: and that’s Hetty Green. There aren’t a lot of photos of her because she died in 1916, but she had an incredible investment career. Here are five lessons we can learn from Hetty.

1. Start early

Wearing hats wasn’t the only trait that differentiated Hetty from other world class investors. With her grandfather’s encouragement Hetty had learned to manage her family’s financial accounts when she was just 13 years old. Born into the Quaker family (yes, the cereal name) Hetty was raised with conservative financial principles that would stay with her for life. The world was much simpler back in the days before Instagram and electric scooters. But while other kids were playing hopscotch outside, Hetty was busy reading financial papers and stock reports. 🙂

2. Practice delayed gratification

When her father bought her brand new clothes, Ms. Green sold her new wardrobe and purchased government bonds with the money instead. She eventually turned an inherited sum of $6 million into $100 million by 1916, which is the equivalent of $2.3 billion in today’s climate thanks to inflation.

3. Have an independent mindset and don’t follow the crowd

Hetty followed a contrarian investing strategy where she bought stocks and bonds when the market was full of pessimistic sentiment. She also had a knack for snapping up cheap real estate deals and trading railroad companies. In her own words she told the New York Times in 1905, “I believe in getting in at the bottom and out at the top. I like to buy railroad stocks or mortgage bonds. When I see a good thing going cheap because nobody wants it, I buy a lot of it and tuck it away. I keep them until they go up and people are anxious to buy. That is, I believe, the secret of all successful business.” She showed off this strategy a couple years later in 1907. After deciding that the market was overvalued, Hetty called in all her loans. Then, when the market crashed, she swooped in and bought them again at the lows. This line of thinking is very similar to Warren Buffett’s investment advice about being “fearful when others are greedy and greedy when others are fearful.”

4. Think with your head, not with your feelings

Hetty understood to not let emotions get in the way of rational decision making. She said, “before deciding on an investment, I seek out every kind of information about it. In business generally, don’t close a bargain until you have reflected on it overnight.” She had an exceptional talent for reading stock market reports and issued high-interest loans to banks and cities in crisis in order to turn over a significant profit.

5. Watch your spending

You can make a $million a year and still be broke by Christmas if you manage to spend everything you earn. This is why Hetty didn’t spend a lot. 🙂 Like many other wealthy investors, she was actually known to be very frugal. She ate mostly pies that cost $0.15 each. One rumor claims that she spent half a night searching her carriage for a lost stamp worth 2 cents. Bill Gates is also known to be thrifty. And here he is waiting in line like a commoner to buy a burger from a drive-in restaurant.

At a 2014 event Bill confessed that he wears a $10 watch and knows he has a reputation for wearing simple and plain clothes. Hetty Green did the same, often seen walking the streets of New York City wearing a disheveled black dress with worn out hems like any other peasant.

I like how certain asset classes such as stocks, bonds, railroads, and real estate have made different people across multiple centuries wealthy. That’s a strong indication that these types of assets are time tested to provide reliable long term gains to buy and hold investors. 🙂 Thank you Hetty for the valuable history lesson, and showing us evidence that certain investment strategies are timeless.

That reminds me. Since I’ve been focused so much on the stock and bond markets lately I had completely neglected the real estate market. As interest rates appear to be dropping worldwide, it’s likely that the Bank of Canada will start to cut rates here as well. Based on that assumption I may decide to buy some new real estate soon. I will begin by looking in the Greater Vancouver area for good opportunities.

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