Keynes the Stellar Investor

Unlike many investors who buy high and sell low, Keynes learned from his mistakes and three separate events that triggered near financial ruin. He was able to move on, reach new conclusions about how to regard market movements and earn a place in the pantheon of great investors that includes Benjamin Graham, Warren Buffett and George Soros.

In addition to eventually crafting ideas and institutions that would rescue Western economies (and Japan) after two devastating cataclysms, he managed money for his own portfolio, his Bloomsbury friends and several institutions. Keynes was most likely one of the first hedge fund managers and established some time-honored principles that the best investors follow today.

Keynes's performance under fire during the 1930s and World War II (his street in London was bombed), inspired several generations of investors that followed. His dogged pursuit of value stocks, dividends, cash flow and future earnings established him as a durable "buy and hold" investor who was confident he would be rewarded in the long run.

After his death, the vindication of Keynes' portfolios proved that he deserved to be emulated. Although his estate was worth at least $22 million (in 2013 dollars) when he died, his contribution to the arts, modern economics and a more stable global economic climate is incalculable.

 

As an investor, he championed the merit of examining the "earning power" of stocks, looking deep into a business's ability to survive in a variety of economic conditions and the abandonment of market timing and speculation.

The larger message from Keynes's investment style is that if he saw value in a company, he ignored the short-term "noise" of the market and held onto a company he saw as a worthwhile enterprise. He was always looking ahead and didn't particularly like selling a stock. And if a stock paid dividends, that was icing on the cake.

Today, when retirement investors are starved for yield, finding dividend-paying stocks that raise their quarterly payments on a regular basis, makes eminent sense. You can actually build a growth-and-income portfolio around them.

Even more significant is his recognition of "animal spirits" and the role that mass psychology plays in investing and markets. In doing so, he tackled one of the most elusive -- and powerful -- elements of markets, behavior that modern economists have still yet to fully understand, much less predict.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

John F. Wasik is the award-winning author of 14 books, a speaker, journalist and blogger. He writes a weekly investment column for Reuters, the world's largest news service, and contributes to The New York Times, Forbes and other publications. He lives in Grayslake, Ill., and has spoken to investment club conferences across the country.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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