Henry Clews was one of the original Wall Street icons. Clews was a broker and investment banker who lived in New York and got into the business by marketing federal bonds during the Civil War.

While he went on to become one of the richest men of his time, Clews had a unique ability to offer investing advice to government officials and other investors in a folksy style not too dissimilar from that of Warren Buffett. You can get a great perspective on the man and the times by reading Clews’ memoirFifty Years In Wall Street” which was published following the Wall Street Panic of 1907.

Investing Advice From Wall Street Icon Henry Clews

Top investing advice from Henry Clews

Clews says you have to be able to trust your own judgement to be a good speculator/investor.

1. What it takes to be a great investor/speculator

“There is no mental discipline more severe and exacting than that of speculation. There is no pursuit in which a man can less afford to indulge in whims, or prejudices, or pet theories, than that of stacking his money against the prospective changes in financial values. He must be as calm and as impartial as a judge, not less in respect to the risks he incurs than in regard to the integrity of his own judgment. I should lay it down as the first rule necessary to success, that the judgment be not warped by any natural idiosyncrasies; this being secured, a man may succeed in spite of his constitutional defects.”

Clews, like many on Wall Street today, understood the power of volatility.

2. Embrace volatility

“To the question often put, especially by men outside of Wall Street, “How can I make money in Wall Street?” there is probably no better answer than the one given by old Meyer Rothschild to a person who asked him a similar question. He said, “I buys ‘sheep’ and sells ‘dear.’ ”

Those who follow this method always succeed. There has hardly been a year within my recollection, going back nearly thirty years, when there have not been two or three squalls in “the Street,” during the year, when it was possible to purchase stocks below their intrinsic value. The squall usually passes over in a few days, and then the lucky buyers of stocks at panic prices come in for their ranging from five to ten percent on the entire venture.”

Even a century ago, much of the financial media was not honest, and Clews warns investors to be wary.

3. Be wary of the financial media

“The object of [financial news] agencies is a useful one; but the public have a right to expect that when they subscribe for information upon which immense transactions may be undertaken, the utmost caution, scrutiny, and fidelity should be exercised in the procurement and publication of the news. Anything that falls short of this is something worse than bad service and bad faith with subscribers; it is dishonest and mischievous.”

Clews also notes it takes more than just information to make a good investor.

4. Information by itself is not enough for success

“Singular as it may seem, there are no advantages beset with greater dangers than information — the one thing most largely sought after and most highly prized.

Many speculators lose because the information on which they base their operations is insufficient; more because it is false; and others because, while their information is correct, they do not know how to turn it to account.”

One unexpected piece of investing advice from Clews is to remain humble even when you experience success.

5. Humility is an important part of long-term investing success

“All these reminiscences of the ups and downs of Wall Street will serve to remind my readers that, while it is often easy to make money, it is still easier to lose it. Therefore, boldness should be always tempered with caution in the pursuit of the Almighty Dollar in Wall Street.”

Clews also says only make investments in areas that you are knowledgeable about, otherwise the likelihood of mistakes rises significantly.

6. Leave stock speculation to the experts

“Speculation is a business that must be studied as a specialty, and though it is popularly believed that any man who has money can speculate, yet the ordinary man, without special training in the business, is liable to make as great a mistake in this attempt, as the man who thinks he can act as his own lawyer, and who is said “to have a fool for a client.”

The common delusion, that expert knowledge is not required in speculation, has wrecked many fortunes and reputations in Wall Street, and is still very influential in its pernicious and illusory achievements.”

Clews was one of the first Wall Street icons to warn new investors to not over-lever.

7. Always keep a cash reserve

“Another source of losses in speculation lies in the speculator not holding back a cash reserve sufficient to protect him against an adverse course of prices. Ordinarily, the man who speculates is of a sanguine temperament, and apt to take risks without sufficient provision against contingencies. Hence, it is common with inexperienced operators to use all their available resources in their original margin.”

Last but not least, Clews tells investors to study history and learn from their mistakes.

8. History matters because there is nothing new on Wall Street

“The maxim that history repeats itself has been fully verified in Wall Street.”

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