Bankroll Management - A Lesson from Soros and Druckenmiller

In 1992, George Soros and Stanley Druckenmiller made a massive short bet against the British pound, which they famously won, resulting in profits of over $1 billion and the nickname "breaking the Bank of England". Their strategy involved shorting the pound (betting on its value to fall) because they believed the UK's entry into the European Exchange Rate Mechanism (ERM) was unsustainable due to high inflation and interest rates.

If you’re an investor, or even a market historian, you may know this trade and if not I am going to dive into it in this post because there is more to it than meets the eye.

Coming up in this business reading about these guys, these trades and the mindset that went into them was fascinating to me, and it still in, in fact, I think Druck is the all time great — so we’re clear.

This trade made a lot of money, sure, but I’ve read this so many times when I was younger that I had other take aways from it that have helped me to form my views on portfolio management, or in another term (for my poker players), bankroll management.

In this post I am going to dive into this trade, the thought process they took and the key takeaways that I think any investor can incorporate into their own bankroll management process.