Paul Tudor Jones Investing Philosophy

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Paul Tudor Jones’s greatest success came during the 1987 market crash. On the morning of October 19, 1987, otherwise known as "Black Monday," the global stock markets crashed.
Jones had predicted this crash. As a result, he tripled his money by holding short positions and selling futures contracts.

When it comes to making money in the investing world, few names are more synonymous with success than Paul Tudor Jones. Throughout his career, Jones has consistently shown an uncanny ability to generate massive returns, regardless of market conditions.

Given his track record, it's no surprise that forex and investing beginners always ask, “How did Paul Tudor Jones make his money.” For beginners, it is always helpful to learn from the experiences of those who have already made their mark in investing, like Paul Tudor Jones.

This article will take a closer look at the life and career of this legendary investor and examine some of the secrets behind his success.

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Who is Paul Tudor Jones? A Brief Biography

Paul Tudor Jones was born in 1954 in Memphis, Tennessee. He graduated from the University of Virginia in 1976. While in college, he made a living by writing for his father’s small business paper, the Memphis Daily News, under the name Paul Eagle.

Although he was accepted to Harvard, Jones declined the offer. Instead, he chose to ask his cousin, William Dunavant, to teach him the trading basics. Dunavant referred Jones to Eli Tullis, a commodity broker based in New Orleans.

Tullis was an experienced trader, given that he was representing reputable cotton traders. He was therefore skilled enough to mentor Jones into trading cotton futures on the New York Cotton Exchange during the late 1970s. At only 24, Jones had gained enough skills to become a commodities broker working for E. F. Hutton & Co.

In 1980, Paul Tudor Jones founded Tudor Investment Corporation, a hedge fund that continues to be a major source of his fortune. One of his most notable successes was correctly predicting the 1987 stock market crash. Jones made $100 million in profits on that day alone.

In recent years, Jones has become increasingly involved in philanthropy. In 2013, he founded the Robin Hood Foundation, a non-profit organization aiming to alleviate poverty in New York City.

In May 2020, Jones said he had used 1–2% of his wealth to buy some bitcoin to hedge against inflation. Paul Tudor Jones's Bitcoin investment came when the central bank was expected to print more money to revive the economy from the coronavirus pandemic.

How Did Paul Tudor Jones Make His Money?

Jones mostly makes his money from Tudor Investment Corporation, a modern-day hedge fund he founded in 1980. The corporation focuses on the fluctuations of interest rates in the currency market. Today, the corporation manages assets worth approximately $11 billion.

The hedge has been incredibly successful over the years, generating an average annual return of 19%. Tommy Robins, who works closely with Jones, has made claims that the fund has been making consistent returns. It has made money every year for the past two decades.

However, Paul Tudor Jones’s greatest success came during the 1987 market crash. On the morning of October 19, 1987, otherwise known as "Black Monday," the global stock markets crashed.

Jones had predicted this crash. As a result, he tripled his money by holding short positions and selling futures contracts. From his bet that the market would fall, Jones made a return of 125.9%, which translated to $100 million in a single day.

What is Paul Tudor Jones Net Worth?

According to Forbes, Paul Tudor Jones’ net worth is currently $7.3B. This puts him at position 316 in the Forbes real-time ranking of the world’s wealthiest people.

Forbes shows that this is the wealthiest that Jones has been since 2013. He has moved from $5.1 billion in 2020 to $7 billion in 2021 to $7.3 billion in 2023. With more investment opportunities up for grabs, it's only likely that Jones will become even wealthier in the future.

Paul Tudor Jones Portfolio and Investments

Paul Tudor Jones has an incredibly diverse portfolio. As per the 13F filings from the first quarter of 2023, Tudor Investment Corporations invests in stocks in different industries. The main ones include real estate, information technology, healthcare, utilities and communications, finance, and consumer discretionary.

Jones’ hedge fund is reported to have invested in 637 new stocks during 2023’s first quarter. The most notable stocks in his portfolio include Zoom Video Communications, Inc., Amazon.com, Inc., and Airbnb, Inc. Despite his continued investment in stocks, Jones has warned that bonds and stocks are not the best investments in today’s environment.

It’s no wonder Paul Tudor Jones is diversifying his investments further by investing in cryptocurrencies. He revealed that he started investing in Bitcoin in 2020, asserting that his portfolio includes a modest crypto allocation. Jones believes that crypto is a better inflation hedge than gold.

What is Paul Tudor Jones' Trading Strategy?

Paul Tudor Jones trading strategy combines different techniques to help him identify market opportunities. Some of these techniques include:

Technical Analysis

This method involves forecasting future market prices by analyzing past price patterns. Paul Tudor Jones’s trading strategy is based on technical analysis and mass psychology. He believes the markets are driven by human emotions, which tend to repeat themselves.

By analyzing past market data, he attempts to identify patterns that he could use to predict future price movements. This strategy has proven incredibly successful for him, as he correctly predicted one of the biggest market crashes.

In the 1987 stock market crash, Paul Tudor Jones and his colleague Peter Borish mapped the market against the market that preceded the crash in 1929.

This analysis helped them realize there was a direct comparison between the 1929 market and the ongoing market trends in 1987. Using this information, they made one of the greatest trades in the history of Wall Street.

Global Macro Trading

This type of trading involves taking positions in global financial markets based on economic and political developments. Jones is a big believer in this type of trading, as he believes it offers the best opportunities for making money.

This philosophy has helped him make some of his career's biggest and most profitable trades. When investing using this strategy, Jones prefers using the futures market. He believes it offers more liquidity and better opportunities for hedging than the stock market.

Active Money Management

Active money management involves tracking an investment portfolio’s performance and making selling, holding, and buying decisions regarding a particular asset. The goal is to beat the average returns in the stock market and take advantage of price fluctuations in the short term.

Paul Tudor Jones' trading strategy involves this approach because he is always monitoring his positions and ensuring that his investments are performing well. If he sees that a particular asset is not doing well, he will quickly sell it off and move on to another investment.

Paul Tudor Jones' Advice for Beginners

If you're new to investing and trading, Paul Tudor Jones has some great advice for you. Here are five tips from the man himself:

Classroom Knowledge Won't Prepare You Enough for Trading

You need to be prepared for the reality of the markets, which can be very different from what you expected. You will only learn the best lessons by trading in the market. Learning by doing is better because the market is full of surprises and no education can prepare you enough to handle them.

Always Play Defense, Not Offense

One of the most famous Paul Tudor Jones quotes is, "The key is to play great defense, not great offense." This quote calls for traders to always start small by avoiding risking too much. The goal should be to minimize your losses by using a defensive strategy when playing.

If you are offensive, it is easy to make the mistake of venturing into a trade too soon without having a plan or a strategy. You should realize that the market will always be full of opportunities, and you shouldn’t rush without a trading plan.

Put Ego Aside

Ego can cloud your judgment and lead you to make impulsive decisions. One of Paul Tudor Jones' quotes says, “Don’t be a hero. Don’t have an ego. Always question yourself and your ability."

This quote teaches you that even when you begin to feel comfortable in trading, you should never let your ego take over. You should always be aware of your own limitations and make sure to question your decisions.

Don't Always Follow the Trend

Just because everyone else is doing it doesn't mean you should too. It can be tempting to jump on the bandwagon when everyone is buying, but this is often when the market is about to turn. The most crucial thing trading is to stay with your original premise.

You should always stick to your original analysis and not get swayed by what everyone else is doing. Jones is a contributor to the book “Jesse Livermore-Boy Plunger: The Man Who Sold America Short in 1929." You can read it to learn how choosing your own distinct trading strategy can help you succeed.

Don't Be Afraid of Taking Losses

Taking losses is a part of trading, and you need to be prepared for it. If you're afraid of losing money, you'll never make it as a trader. One of the most important things to remember is to always cut your losses short. If a trade isn't working out, get out as soon as possible.

The longer you stay in a losing trade, the more money you'll lose. You can use a price and time stop to limit your losses. If you would like to learn more about minimizing your losses, you can read "Market Wizards: Interviews with Top Traders".

Best Forex Brokers 2024

If you want to make a name for yourself as a reputable investor, you can get started in forex and stock trading with a small amount. Some platforms can help you trade in stocks and forex. These include:

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Oanda is the best platform if you wish to invest in forex trading. You will have access to over 70 currency pairs and tight spreads on all the minor and major currencies.

This broker is also one of the few that offers a free demo account with $100,000 in virtual money. The demo account allows you to sharpen your skills and test different strategies. When you're ready to start trading with real money, Oanda does not have a minimum deposit, making it ideal if you want to invest or trade with only a small amount.

The Bottom Line

Whether you are a beginner or an experienced trader or investor, you can learn something from Paul Tudor Jones. Use these lessons from Jones to improve your trading strategy and make better decisions when investing in the markets. You can get started quickly and easily with reputable platforms like eToro and Oanda.

FAQs

What is a hedge fund?

A hedge fund is a type of investment fund that pools together money from different investors to invest in securities, commodities, and other assets.

What is the difference between a hedge fund and a mutual fund?

The main difference between a hedge fund and a mutual fund is that hedge funds are not subject to the same regulations as mutual funds. Hedge funds are also typically riskier and more volatile than mutual funds.

Can I get rich by investing in stocks, or is the risk too high?

It is possible to get rich by investing in stocks, but it takes time and patience. There is always a risk involved when investing in stocks. However, if you diversify your portfolio, you can minimize your risks.

What does inflation mean for the stock market?

Inflation can reduce the value of investments. It can also lead to higher interest rates, making borrowing money more expensive.

Team that worked on the article

Andrey Mastykin
Author, Financial Expert at Traders Union

Knows about
Trading strategies, technical analysis, Forex, stock market, long-term investing

Andrey Mastykin is an experienced author, editor, and content strategist who has been with Traders Union since 2020. As an editor, he is meticulous about fact-checking and ensuring the accuracy of all information published on the Traders Union platform. Andrey focuses on educating readers about the potential rewards and risks involved in trading financial markets.

He firmly believes that passive investing is a more suitable strategy for most individuals. Andrey's conservative approach and focus on risk management resonate with many readers, making him a trusted source of financial information.

Experience
Andrey's passion for finance began in 2009, and he has since accumulated extensive experience in trading and investing across various asset classes, including stocks, Forex, and cryptocurrencies.

He has spent over 15 years managing his own capital and working with financial portals, financial institutions, and IT companies, as a financial writer and analyst, further refining his investment expertise.

He is the author of several training courses on investing and trading in financial markets. Led multiple FX/Stocks/Crypto webinar educational presentations. Authored hundreds of articles on the global economy, stock, cryptocurrency, and Forex markets, along with trading strategies. He has also penned hundreds of professional reviews of financial firms.

Throughout his journey, Andrey has been heavily influenced by the works of renowned authors and investors like Benjamin Graham, Ray Dalio, Robert Shiller, and Nassim Taleb.

Dr. BJ Johnson
Dr. BJ Johnson
Developmental English Editor

Dr. BJ Johnson is a PhD in English Language and an editor with over 15 years of experience. He earned his degree in English Language in the U.S and the UK. In 2020, Dr. Johnson joined the Traders Union team. Since then, he has created over 100 exclusive articles and edited over 300 articles of other authors.

The topics he covers include trading signals, cryptocurrencies, Forex brokers, stock brokers, expert advisors, binary options. He has also worked on the ratings of brokers and many other materials.

Dr. BJ Johnson’s motto: It always seems impossible until it’s done. You can do it.

Mirjan Hipolito
Cryptocurrency and stock expert

Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.