What John Paulson Can Teach Us

One investor, Michael Burry, got his break as a fund manager when well-known value investor Joel Greenblatt made a big investment in him. Later, after taking a big bet against housing early on, Burry faced Greenblatt's wrath. In no uncertain terms, Greenblatt told him to get out of the trade. Burry didn't but not without taking a huge mental and physical toll on himself. Put yourself in Burry's shoes. What must it have felt like to tell your maker to take a hike?

There are several lessons in The Greatest Trade Ever for investors: believe in yourself (assuming you've done your homework), be skeptical of others' free opinions and assumptions, persist, and take the long view and don't take profits too early.

Every investor involved in this bearish housing trade early on referred to it as their potential "Soros trade" - referring to the famous 1992 bet against the British pound which netted Soros' fund $1 billion.

Paulson used this line himself, but he also remembered another Soros comment that stuck in his mind as he executed his trade. When you see the perfect trade set-up in front of you, Soros advised to "go for the jugular." Paulson did and it paid off big-time. Some of us will never see a trade like that for the rest of our lives. When opportunity knocks, you have to answer.

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