How to invest like the best: how George Soros rewrote the rulebook

Photo: Sergei Guneyev/Getty Images.

Hungarian investor George Soros is probably best known in the UK as “the man who broke the Bank of England”, having profited handsomely from the “Black Wednesday” crisis that hit the then Conservative government in 1992.

More recently, Soros, a prominent philanthropist and supporter of liberal causes, has attracted the ire of Donald Trump and a broad range of right-wing conspiracy theorists.

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However, look beyond the emotive headlines. Soros is an original thinker whose investment theories have challenged accepted wisdoms – and earned his funds spectacular returns. His Quantum Fund, founded in 1970 with $12 million, was worth around $25 billion by the time Soros decided to close it in 2011 amid a shake-up of hedge fund regulation.

Its annual returns over those 40 years averaged roughly 20%, putting Soros’ record on a par with investors including Warren Buffett.

Since 2011, Soros has largely confined himself to managing money for family offices and institutional investors. But his high-profile, and very often successful, investments have continued.

Now 95, Soros’ background is unusual compared to many of his peers on Wall Street. Born in Budapest to a mother who ran a successful store selling silk and a father who edited a literary magazine, the Jewish family survived Nazi Germany’s occupation of Hungary in 1944, as well as the Siege of Budapest in 1945, when Soviet and German forces fought a bitter battle in the city. The Soros family subsequently moved to Paris and then to London, where he studied at the London School of Economics under philosopher Karl Popper.

Popper’s theories were a major influence on Soros, who spent the 1950s and 1960s working in a series of investment banking and broking roles in both London and New York. They would ultimately underpin the investment approach taken by Soros at Soros Fund Management, launched in 1970.

That approach ultimately reflects two fundamental Soros investment principles. First, Soros built on the work Popper had done on “reflexivity”, the study of cause and effect in human beliefs. His view was that there is an important feedback loop between what humans think about reality and reality itself.

In investment, for example, if humans think the economy is poised to do well, they buy shares in the expectation of benefiting; that pushes share prices up, increasing the value of companies and encouraging them to invest more; that, in turn, boosts the broader economy and the confidence of investors, who buy more shares. The expectation of a strong economy becomes a self-fulfilling prophecy.

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Soros’ second important principle concerns “fallibility”. Financial markets are driven by human behaviours, he argues, and since humans are fallible, markets must be too. Our cognitive biases and emotions lead us to make mistakes when assessing both individual investments and whole markets. That means markets get things wrong too.

Our view of reality, in other words, may not be accurate – but it will still drive the feedback loops Soros describes. What we think about the prospects for financial markets is just as an important determinant of how markets will fare as their underlying fundamentals.

None of which sounds particularly radical, but Soros’ theories are complete anathema to anyone who believes in the efficiency of the market. Traditional economic theory is that investors make rational decisions based on all the information available in the market right now – that their current assessment of the value of investments is therefore an accurate view given what we currently know. The implication of Soros’ theories, by contrast, is that markets are much less stable than that – that they often behave far from efficiently.

The Black Wednesday crisis

There are two ways to make money from this view. One is to “run a profit, cut a loss” as the old investment adage has it. You’re aiming to identify those feedback loops and to run with them for as long as they last, only getting out when they finally begin to run out of steam.

The Black Wednesday crisis was one example. The UK government insisted it would ensure the pound remained at the value agreed under the terms of the European Exchange Rate Mechanism (ERM), raising interest rates several times in its efforts to do that. Soros and other hedge funds didn’t believe ministers’ protestations and the weight of money betting against the pound ensured their view prevailed; collectively, their view that the UK could not sustain its ERM membership, ensured they were right. Soros’ funds made profits of more than $1 billion at the Bank of England’s expense.

Such approaches can work very well in markets prone to boom and bust. During the dotcom bubble of 1995 to 2000, the Nasdaq stock market index rose almost 600%, as investors became more and more excited about the technology boom. For that extended period, it was what investors thought dotcom companies could achieve that mattered, rather than what they could really achieve.

Today, you might take the same view about artificial intelligence (AI). Plenty of people wonder whether technology company valuations can really be justified by the potential of AI. But maybe it doesn’t matter if enough investors are convinced and they keep topping up their holdings.

The second potential Soros-inspired approach to investment is more contrarian. If you can work out when a feedback loop is finally about to run out of steam, you can make money by betting against it. Soros’ funds have always taken both long positions – bets on asset prices rises – and shorts – bets on them falling.

The contrarian approach can deliver big wins. In the mid-1990s, the economies of Asia were growing fast, boosted by government policies such as deregulation and lax borrowing controls. By early 1997, Soros believed there was an asset price bubble in Asia and began betting it would burst – most dramatically by staking as much as $1 billion on a trade to profit if the Thai baht started falling in value. As a financial crisis gripped Asia, that’s exactly what happened, and the Quantum Fund made massive profits on its holdings.

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Still, such strategies can be high risk. Soros himself has warned that timing the market can be very difficult. You may be right that a reversal is coming but working out exactly when is a different challenge – and while you’re waiting, the chances of suffering big losses are worryingly high.

Indeed, Soros himself has got it spectacularly wrong plenty of times. The Quantum Fund lost $300 million during the 1987 US stock market crash, because he believed its previous ascendancy was a feedback loop with further to run. Losses of $700 million in 1999 followed a bet that the dotcom frenzy was about to collapse; it would actually endure for another year.

Nevertheless, Soros’ record has stood the test of time – to his own benefit, naturally, but also for the greater good. To date, his Open Society Foundation, an international grant-making network that makes grants to causes that advance justice, education, public health and independent media, has donated more than $15 billion – roughly two-thirds of his original fortune.

How to invest like George Soros

Investors who buy into the Soros philosophy have the option of betting on a feedback loop continuing or taking a leap of faith that one is about to come to an end. Soros himself may be doing both at a given moment, but right now his largest holdings appear to suggest he thinks the AI/technology boom has further to run.

At the end of 2025, Soros Fund Management’s portfolio was heavily concentrated in companies of that type, including Amazon.com Inc (NASDAQ:AMZN), Alphabet Inc Class A (NASDAQ:GOOGL), Salesforce Inc (NYSE:CRM) and Microsoft Corp (NASDAQ:MSFT); the firm has also recently increased its stakes in NVIDIA Corp (NASDAQ:NVDA) and Tesla Inc (NASDAQ:TSLA).

To invest like Soros, you could follow those stock selections – or an index-tracking fund that is concentrated in tech stocks, such as L&G Global Technology Index I Acc. Even a standard global tracker will provide a sizeable exposure to the so-called Magnificent Seven stocks, which collectively account for just over 22% of the MSCI World Index.

Alternatively, as Ben Yearsley, a director of Fairview Investing, points out, you could have more fun – and take more risk – with a contrarian approach. “I think being a contrary investor is well-suited to the British psyche,” Yearsley says. “We want a good deal, and we don’t want to pay too much.”

In fact, several leading UK fund managers have made their names through this type of investment. Anthony Bolton, for example, had huge success at Fidelity UK Special Situations W - GBP and Fidelity Special Values Ord (LSE:FSV), by investing this way.

“The UK is home to many contrarian investors, from Ian Lance and Nick Purves at Redwheel to Alex Savvides at Jupiter and to Alex Wright at Fidelity, the successor to Anthony Bolton,” Yearsley says. Their funds include Redwheel Global Intrinsic Value R GBP Acc, Jupiter UK Dynamic Equity I Acc and Fidelity Special Values.

Still, such approaches can be frustrating. “Being a contrary investor is tough, as you often have to sit there watching the in-vogue stocks going through the roof while your boring old economy factory gets cheaper and cheaper,” adds Yearsley.