John Maynard Keynes' key to successful investing

You probably know John Maynard Keynes (born June 5, 1883) as an economist whose ideas called Keynesian economics have had a major impact on modern economic and political theory as well as on many governments' fiscal policies. But little you know that he was also a great investor, maybe the most successful of the Great Depression era.

Keynes managed Cambridge's King's College Chest Fund. The Fund averaged 12% per year from 1927-1946, which was remarkable given that the period seemed to be all about gray skies and storm clouds – it included the Great Depression and World War II.

Keynes also made himself a personal fortune as an investor. When he died on APril 21, 1946, he left an estate worth some US$30-million in present-day dollars.

However, like any investor, Keynes investing career was a flop during its initial phase. He started as a run-of-mill speculator, trying to anticipate trends and forecast cycles. Keynes was, in fact, nearly wiped out in the Great Crash of 1929. His personal net worth fell by more than 80%.

After the crash, he became an investor, rather than a speculator. He now focused less on forecasting the market. Instead, he cast his keen mind on individual securities, trying to figure out their "ultimate values".

He also became more patient. Keynes learned to hold on to his stocks "through thick and thin" to let the magic of compounding do its thing in a tax-free fashion, too, by avoiding capital gains taxes. It also meant limiting his activities to buying only when he found intrinsic values far above stock prices.

Moreover, he learned to trust more in his own research and opinions, and not let market prices put him off a good deal.As he went along, he was able to develop a fierce contrarian streak. One of his greatest personal coups came in 1933 during the period of The Great Depression. Then U.S. president Franklin Delano Roosevelt's speeches gushed with anti-corporate rhetoric. The market sank. America's utilities were became extremely cheap. He bought the depressed preferred stocks, and in the next year, his personal net worth would nearly triple.

At times during Keynes' career, half of his portfolio might be in only a handful of securities, though he liked to mix up the risks he took. So though five names might make up half of his portfolio, they wouldn't be all gold stocks, for instance. They were well diversified.

Keynes, perhaps reflecting on this experience, said that investors need to take losses with "as much equanimity and patience" as possible. Investors must accept that securities prices can swing wide of underlying values for extended stretches of time.