Legendary Trader Paul Tudor Jones II Says ‘One Should Not Focus On Making Money But On Protecting What You Have’

Paul Tudor Jones II, a legendary trader known for his unique investment strategy, stresses the significance of protecting existing wealth rather than chasing new fortunes.

Jones, who forwent a conventional business education to set up his own fund, Tudor Investment Corporation, has become a prominent figure in macro trading. His investment strategy doesn’t revolve around individual companies or sectors, but rather on predicting fluctuations in interest rates and currencies.

Jones gained significant recognition when he successfully shorted the market during Black Monday in 1987. His fund yielded a 200% return that year, earning him an estimated $100 million and establishing his reputation in the hedge fund industry.

In an interview in 2000, Jones said, “most people lose money as individual investors or traders because they’re not focusing on losing money. He believed that one should not focus on making money but on protecting what you have.”

“People need to focus on the money that they have at risk and how much capital is at risk in any single investment they have. If everyone spent 90% of their time on that, not 90% of the time on pie-in-the-sky ideas of how much money they’re going to make, then they would be incredibly successful investors,” he added.

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Jones’ career is marked by his extraordinary ability to foresee market shifts. He made substantial profits during the market crash in Japan in 1990 and again during the tech bubble burst in the early 2000s.

Jones asserts that the secret to successful trading lies in focusing on risk management and safeguarding existing investments. He encourages investors to dedicate 90% of their time contemplating the capital at risk in their investments instead of fantasizing about potential profits.

Despite a recent performance slump, Jones is resolute in demonstrating his enduring investment acumen. His primary hedge fund recorded an average annual gain of approximately 26% from 1987 through 2007, which declined to around 5.3% from 2008 through 2016.

Jones’ emphasis on protecting existing investments over pursuing new riches offers a valuable lesson for investors. His success, despite market fluctuations, underscores the importance of a strong defensive strategy and risk management in trading.

This approach may be particularly relevant in today’s volatile market environment, where the focus on risk control could potentially safeguard investors from significant losses.