Soros Fund lost $800M in the 1987 crash — the world's best investor got it wrong

Soros Fund Management's flagship Quantum Fund was one of the most successful hedge funds in history, managed by George Soros. In 1987, Soros made a famous bet against the US stock market that was prescient in timing — but disastrous in execution.

Soros correctly predicted the market was overvalued and sold his US stock portfolio before the October 1987 crash. When Black Monday hit on October 19, 1987, the Dow fell 22.6% in a single day. Soros was right about the direction — but then he made a fatal mistake.

Believing the crash was overdone, Soros bought back into the market, betting on a rebound. Instead, the market continued to fall. The Quantum Fund's S&P 500 futures positions, which had been profitable before the crash, turned into a $800 million loss.

The loss was devastating for a fund that had returned over 30% annually for years. Soros himself described the 1987 crash as his most painful investing experience, saying that being right about the direction of the market was worthless if you got the timing of your entry wrong.

Soros sold before the crash but bought back too soon, reversing a winning position and turning a correct prediction into an $800M loss on S&P 500 futures.

Soros sold stocks before the crash but then bought back too early, reversing a winning position and turning a correct prediction into a $800M loss.

The Quantum Fund's S&P 500 futures positions were so large that the rebound bet was a concentrated bet on one market direction — the opposite of diversification.

Soros's confidence in his own market call led him to ignore the signals that the crash was not over, a classic example of a successful investor doubling down on a position that had already gone wrong.

The world's best investor learned that being right about the direction of the market is useless if you get the timing wrong. Soros lost $800M buying the dip before the dip was done.