Great investors in history: Alfred Winslow Jones
A late-starter to the profession, Alfred Winslow Jones carved out a successful career as an investor by hedging his bets.
Unlike most other great investors, with the possible exception of Georges Doriot, Jones didn't become involved in investment management until he was nearly 50. After graduating from Harvard in 1923, Jones changed career several times. He worked as a purser on a tramp steamer, had a spell as a diplomat, and then became a sociology lecturer, before going on to write for various publications, including Fortune magazine.
Writing an article on technical analysis sparked interest in Wall Street. In 1949, he founded A. W. Jones and Company, one of the first "Hedged Funds". He ran it for more than 30 years, before handing over control in 1984.
What was his strategy?
Indeed, in the early 1970s it had a leveraged long position (in other words, it was aggressively betting on a rising market, and so it ran into trouble when the opposite happened). He outsourced a lot of his stockpicking to a team of analysts who were selected by getting them first to run paper portfolios.
Did this work?
What lessons are there for investors?
Firstly, running a "paper-trading" account is a good way of trying out a strategy to see whether it works (and if you are comfortable with it), before risking real money. Secondly, Jones's problems with excessive leverage in the early 1970s show the dangers of taking big bets with borrowed money regardless of how confident and capable you are.