1. Be contrarian -- buy low and sell high
After Sir Isaac Newton lost a bundle when the South Sea Bubble burst in 1720, he exclaimed: “I can calculate the motions of the heavily bodies, but not the madness of people.” Another to lose money in the collapse of the South Sea Co. was Gulliver’s Travels (1726) author, Jonathan Swift. To vent his rancor, he wrote The Bubble (1720).
2. Beware of wheedlers
Before Robinson Crusoe (1719), Daniel Dafoe wrote The Villainy of stock-jobbers detected (1701) wherein he declared stock-jobbers “…can ruin Men silently ….'tis a compleat System of Knavery …a Trade found in Fraud, born of Deceit, and nourished by Trick, Cheat, Wheedle, Forgeries, Falshoods, and all sorts of Delusions.”
3. Beware of leverage:
Prior to writing Vivian Grey (1826) and becoming prime minister of Great Britain, Benjamin Disraeli wrote ‘prospectuses’ for promoters of South American and Canadian mining companies. With the London stock exchange of 1820 gripped by a mania for such New World stocks, Disraeli borrowed heavily to invest in companies prior to the publication of his puff pieces (“veins of ore of immense and incalculable worth,” he wrote in one report). But the fever broke and Disraeli was saddled with crushing debt.
4. Beware of random walks
"October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February," wrote Mark Twain. In 1873, Twain penned The Gilded Age (1873), a scathing satire of the circle of “phony stock promoters, corrupt politicians, naïve investors, and journalistic dupes” from which sprang his era’s mania for railroad stocks.
5. Invest for the long-term
Compound interest is the “greatest invention of mankind” since it “allows for the reliable, systematic accumulation of wealth,” remarked Albert Einstein. Before him Benjamin Franklin called compounding the “eighth wonder of the world” and illustrated this by willing $4,500 of his money to be loaned at interest for two centuries (it totaled $5 million by time it was disbursed to the City of Boston in 1993).