The world’s greatest investors: Hetty Green

Hetty Green was born in New Bedford, Massachusetts, in 1834. The daughter of a wealthy whaler, she inherited her father’s fortune in 1865, as well as receiving a large legacy from an aunt the same year (though legal battles over the latter weren’t resolved until five years later). She would use that money to become a successful investor. Noted for her extreme frugality, wearing worn clothes and eating only oatmeal, she became known as the “Witch of Wall Street”.

What was her strategy?

Green was an early value investor, buying securities when they were cheap, and then selling them when she felt that they were overvalued. She also invested large amounts of money in real estate, focusing on buying in areas that were set to grow.
She kept a significant percentage of her portfolio in cash in order to buy assets cheaply when the opportunity arose.

Did it work?

Between 1865 and 1916 her net worth rose from $6.3m to an estimated $150m, equivalent to $3.38bn today (though some experts have valued her estate as high as $200m). This is an annual rate of return of around 6% – impressive enough in an era of near-zero inflation, and given the fact that most of the money she received from her father was tied up in a trust until 1896. She also had to repay large debts created by her husband’s speculation (leading to their separation). So her real returns on her investments were even larger than they look.

What were her biggest successes?

In the aftermath of the US civil war, Green invested heavily in Greenbacks, short-term US debt that functioned as the first paper currency. Because of uncertainty about whether the US economy would be able to recover, these traded at a huge discount to their face value. She claimed to have made $200,000 in one day alone. Undoubtedly her finest hour, however, was the Panic of 1907. She had felt that the market was overvalued, so she liquidated most of her bonds and shares before the stockmarket plunge. She was then invited by JP Morgan to join in the rescue effort, and lent large sums to New York City.

What lessons are there for investors?

Green’s legacy shows that saving a large portion of your income and taking a calm, long-term approach to investing can lead to huge increases in net worth, thanks to the power of compound interest. It also shows that going against the market when sentiment is at extremes can pay off.