CHICAGO (Reuters) – What many people don’t realize about economist John Maynard Keynes is that he was a professional investor, not just a thinker who addressed big issues. Although Keynes did not foresee the crash of 1929 and was nearly wiped out on three separate occasions, he made money during some of the most challenging years – and pioneered some durable investing principles along the way worth following in all market conditions.
So how would the father of Keynesian economics, who died in 1946, have played 2014?
He likely would not have been swayed by the recent swoon – the S&P 500 Index is down 3 percent year-to-date through January 24. He quickly threw out conventional wisdom and stopped trading based on big economic themes in the early 1930s, instead focusing on the intrinsic value of companies. This strategy later influenced mega-investors like Warren Buffett, George Soros and John Bogle.
When stocks were getting battered, Keynes was buying. He managed money for his alma mater, King’s College at University of Cambridge, as well as two British insurance companies, friends and family.
In researching my recent book “Keynes’s Way to Wealth,” (McGraw-Hill, 2013, ((link.reuters.com/gyf46v )) ), I discovered that Keynes made money in 12 out of 18 years between 1928 and 1945, a period that includes the Crash of 1929, the Great Depression and World War Two. All told, his annualized return for the Cambridge “Chest” portfolio, a discretionary portfolio he managed, was 13 percent from 1928 through 1945, compared with a negative 0.11 percent for the UK market during that period.