Investment Blunders of the Rich and Famous...and What You Can Learn from Them

Part 3. Colossal Blunders

The self-inflicted problems (Part 1) and the problems that occur when trying to beat the market (Part 2) can even affect the professional investors. Indeed, the investment blunders of the rich and famous are often spectacular. Consider the hedge fund, Long-Term Capital Management, run by famous bond traders and two Nobel Prize winners in Economics. In a couple of months in 1998, they managed to lose $4 billion and put the word financial system in such a crisis that the Federal Reserved needed to orchestrate a rescue.

Or, consider the predicament of Orange County, California. One of the richest counties in the country, Orange found itself forced to declare bankruptcy after its highly respected treasurer lost $1.7 billion. ...