Newton’s Folly: A Bubble Lesson for Today’s Expat Investors

In 1720 Sir Isaac Newton – the man who unlocked gravity’s secrets – found himself humbled by one of history’s first great market manias. He had amassed an early fortune through steady investment and even cashed out of the South Sea Company for a tidy profit. But as prices kept climbing, Newton leapt back in and bought at the top of the boom. By late 1720, the South Sea Bubble had burst and he was ruined, reportedly losing the equivalent of tens of millions of pounds in today’s money. Newton would later lament that he could calculate planetary motions but not the crowd’s “manias” – a notorious reminder that even genius can be undone by speculators’ euphoria.

The South Sea affair is a cautionary tale. A few years after 1718 the South Sea Company had enticed investors with the promise of monopoly trade profits and 100% dividend yields, inflating its stock far beyond any real earnings. George I himself took a symbolic stake in 1719, and rumors of boundless riches spread like wildfire. In August 1720 the stock hit an astronomic £1,000 per share – up 600% in a few months – before collapsing 80% by year-end. When the crash came, masses of investors found themselves wiped out or on the brink of ruin. Newton was among them – even after a profitable early sale, he re-entered at the frenzy’s climax and promptly erased his gains. According to historical reconstructions, Newton sold and repurchased shares to the tune of £20,000 in gains and losses, and even exchanged other government bonds for South Sea stock only to turn a potential £13,000 profit into a loss. In sum, his ill-timed timing created a loss he later described (by implication) as “£20,000 or £30,000” – a fortune equivalent to perhaps £40m today.

Newton’s fate was widely reported even in his own lifetime. The incident spawned the oft-cited maxim that one can compute the heavens but not the ‘madness’ of markets – a saying that has echoed through centuries of investment lore. In Newton’s case, his mistake was to concentrate his bets too heavily on one exuberant story. Where he should have dialed back exposure or diversified into other ventures, he joined the crowd and rode a one-way rocket until the bottom fell out. This echoes many later blow-ups: Tulip mania, the 1929 stock crash, the dot-com boom and bust around 2000, the housing bubble in 2008 and even the recent cryptocurrency frenzy. In each case, exuberant betting on narrow sectors or assets turned a gold rush into a dust storm when the music stopped.

By contrast, investors who spread their bets tend to fare better over time. Modern data support what Newton’s experience implied: concentrated portfolios can deliver sizzling gains – and stunning losses. Today’s markets carry similar warning lights. As of 2025, for example, the US equity market was extraordinarily top-heavy: the eight largest US companies (all tech or tech-adjacent) comprised nearly 40% of the total stock market value, double the concentration at the dot-com peak. The forward price/earnings ratio on the S&P 500 hovered around 23× – territory last seen in 2000 – prompting central banks and institutions to issue caution. In late 2025, the Bank of England warned that stretched valuations (especially in AI-focused tech) raised the risk of a “sharp market correction” if expectations go unmet. The IMF echoed this view, noting that many risk-asset prices seemed to exceed fundamentals and that an AI-induced shakeout could ripple through global finance.

Meanwhile Singapore’s own sovereign fund managers have sounded alarms. GIC’s chief investment officer recently warned of a “hype bubble” building in early-stage AI ventures. He noted that if AI technology fails to catch up with sky-high market expectations, “we’re in for a bubble” burst. Such concerns highlight how investor fervor – much like the 1720 crowd’s faith in slave-trading profits – can detach prices from reality. In other words, the lessons of 1720 feel uncomfortably familiar today: market euphoria and concentration leave even smart money vulnerable.

For expatriate investors in Singapore, these lessons are especially relevant. Many expats build careers in high-growth sectors or multinational firms, and their personal wealth can become tied up in few assets or geographies. One colleague at a tech company might own stock options in a single US firm, while another expat might hold most savings in local property or Singapore blue chips. This home- or sector- bias can look like a sure bet when markets are booming, but it amplifies risk when a single bubble pops. The global flows data of 2025 illustrate this vividly: in July 2025, an unprecedented $13.6 billion poured into equity funds that exclude the US market, as investors diversified geographically rather than chase US returns. Europe and Asian stocks, which had lagged, suddenly attracted cash and then outpaced US indices by wide margins. By mid-2025, the MSCI Asia Pacific ex-Japan benchmark was up roughly 14% for the year versus only ~7% for the S&P 500. In effect, those who avoided “going all-in” on the US ran with the winners. For expats, this underscores the point: a truly global portfolio – not a single-country hunk of geography – can smooth performance when markets diverge.

Portfolio diversification means more than spreading equity bets across the globe. It also means blending asset classes and industries so that any one crash or boom does not dictate your entire fortune. In practice this might mean holding bonds or cash and equity; investing in real assets like property or commodities as well as shares; and diversifying sectors so that a tech meltdown or property slump does not wipe you out. Academic and industry analyses repeatedly confirm the value of such balance. For example, a recent industry survey noted that in a frothy market cycle, adding historically uncorrelated assets (like precious metals or real estate investments) has tempered portfolio volatility in past downturns. One Financial Times commentary puts it simply: when stock markets “take a step down from their current heights, history suggests diversifying assets such as gold will help limit” declines. (Indeed, gold often rallied when equities stumbled in past sell-offs.) Likewise, bonds typically cushion equity losses – albeit less so when rates rise – while alternative strategies or hedge funds may profit when markets wobble. The big idea is that not all your eggs should be in one basket; if technology or any single theme stumbles, a well-rounded portfolio has other ingredients to fall back on.

Diversification can also be viewed as a form of insurance against unforeseen policy or regional shocks. Expats in Singapore often earn or save in multiple currencies: Singapore dollar salaries, perhaps US dollar stock holdings, maybe Euro or other accounts back home. Currency values can swing violently (consider the USD/SGD moves of recent decades), so holding at least some assets in different currencies can mitigate exchange-rate risk. In the recent backdrop, a weakening dollar has magnified returns for non-US holdings, but a reverse move could do the opposite. Similarly, political or regulatory changes can hit one economy hard while sparing others. The 2020s have seen geopolitical strains that could affect trade and markets unevenly; a “China slowdown” or a shift in US policy might rattle one market without touching another. A Singapore-based expatriate might counter such risks by, say, owning European stocks or Asian emerging-market equities in addition to any Singapore blue chips. Indeed, wealth managers now commonly counsel exactly this “world portfolio” approach for globally mobile professionals – in effect, heeding Newton’s old admonition by spreading exposure among asset classes, sectors, and regions.

The recent market data confirm why this matters. In mid-2025, asset allocators noted that broadening out of US tech was paying off. The MSCI Europe index, for instance, was up over 19% in 2025 versus 7% for US benchmarks. Asian markets (even including the stunning rallies in some ASEAN equities) showed growth that US-centric investors missed. Analysts also pointed out the concentration risk of staying narrow: one analysis found that the S&P 500’s “effective number of stocks” – a measure of how many companies actually drive the index – had plunged to record lows by 2023. In plain language, markets were riding on fewer underlying firms than at any time since the dot-com era, meaning a shock to just a few companies could roil the whole index. By contrast, diversifying into dozens or hundreds of names across different industries would soften such shocks.

For expat investors accustomed to periodic rebalancing or hedge management by employers, the principle is the same. During the South Sea Bubble, those who had investments scattered – perhaps in government bonds, land, or private loans rather than only company stock – saw smaller losses. Today, an expat with some allocation to government bonds or Singapore property, some to a US index fund, and some to an ASEAN fund will likely feel less of a blow if any one market falls sharply. This can also help with psychological discipline: it is easier to stay invested when one piece goes down, knowing others may hold steady or rise, than it is to have one nosediving position dragging down the entire portfolio.

Of course, diversification is not a panacea – it cannot stop every loss or guarantee gains. Foreign markets can slump together, and during global crises almost every asset can suffer. But broad diversification is the best-known strategy to mitigate those risks. It forces a degree of balance and due diligence: one must compare companies, economies and sectors globally rather than doubling down on a familiar favorite. For expatriates in particular – who often work abroad precisely because they embrace a global lifestyle – extending that mindset to investments makes sense. Analysts routinely note that expats should be wary of “home country bias” in reverse – not only neglecting their country of origin’s market, but also overfocusing on one narrow sector like local real estate or one foreign stock. Currency hedging is another tool: if you hold a big chunk of assets in a foreign currency, consider hedged instruments or offsetting positions to smooth out rate moves.

In practice, creating a diversified portfolio might include geographic steps (mixing Asia, Europe, North America, etc.), sector steps (balancing technology with finance, consumer, healthcare, etc.), and asset steps (blending equities with bonds, commodities, real estate investments and perhaps alternative strategies). Singapore-based investors often have good access to global markets and should take advantage of it. Exchange-traded funds, mutual funds and multi-asset products exist specifically to help cross these boundaries. A recent review by fund managers noted that portfolios with such diversification have historically weathered downturns better: for example, when the tech bubble turned in 2000, balanced portfolios with even a small bond component far outperformed pure equity portfolios.

The bottom line is straightforward. Newton’s lament nearly 300 years ago foreshadows a timeless investment principle: avoid undue concentration. The downside of ignoring that lesson is plain, as his own fortune showed. For expats living through today’s low-yield, high-valuation environment, Newton’s story should prompt caution. The late-2025 market scene – rising hype around AI and tech, rising stock prices, the creation of “ex-U.S.” funds in record numbers – looks eerily like history repeating itself on a grand scale. Adopting a diversified approach now can pay off later. As market observers have noted, the year’s rotation into non-US equities is a reminder that a diversified portfolio is “not just chasing the next big gain, but also spreading risk”. Wealth managers at Goldman Sachs echo this, stressing that heavy bets on a few stocks can pay off in a boom but mean trouble if momentum fades, and that “for that reason, diversification remains crucial”.

In short, diversify your bets across countries, industries and asset types, and you will be less likely to suffer any one bubble’s burst. History’s best minds – from Newton to today’s strategists – agree: the safest path through volatile markets is a balanced one. By learning the lessons of 1720 and 2025 alike, expatriate investors in Singapore can build portfolios resilient enough to handle the next big swing of fortune

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Singapore Expat Advisory is an agency for Promiseland Financial Advisory Pte. Ltd and are authorised and regulated by the Monetary Authority of Singapore (MAS).

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