3 fascinating investing lessons you can learn from The Great Gatsby


Man reviewing his investments

24 September would have been the birthday of the late, legendary American author, F. Scott Fitzgerald. Among his other notable works, one of his most pre-eminent novels is The Great Gatsby, a tale that encapsulates the excess and splendour of the roaring 20s in the US.

A central theme in Fitzgerald’s seminal novel is money and, throughout the book, the nuanced characters grapple with wealth, status, and the allure of success. These individuals, their choices, and the consequences they face all provide a fascinating insight into the period. 

Some of these insights and themes can also teach you a thing or two about your investing strategy. So, with the renowned author’s birthday here, now is the perfect time to analyse three fascinating investing lessons hidden within the narrative of The Great Gatsby

1. Manage your expectations

Perhaps one of the more subtle forms of symbolism in The Great Gatsby is the green light at the end of Daisy’s dock. 

When Nick Carraway, the novel’s narrator, first moves to West Egg, he witnesses a mysterious figure reaching out towards a green light across the sound. He states that the figure “stretched his arm towards the dark water in a curious way, and, as far as I was from him, I could have sworn he was trembling”.

You soon discover that this figure is the enigmatic Jay Gatsby, and the green light, in part, symbolises his hopes and dreams for the future. This is because Gatsby associates the light with his lost love, Daisy, and he views it as a beacon guiding him towards his ultimate goal: to rekindle his relationship with his former muse. 

Later in the book, when Gatsby and Daisy’s affair starts deteriorating, he realises they could never have returned to what they once were. The green light – previously a symbol of hope and guidance – now represents his unrealistic expectations. 

Nick says that “it had occurred to him [Gatsby] that the colossal significance of the light had now vanished forever … Now it was again a green light on a dock. His count of enchanted objects had diminished by one.”

Much like Gatsby should have held realistic expectations about Daisy, it may be wise to do the same with your investment returns. Otherwise, you could potentially affect your long-term financial security.

Indeed, if your investment plans rely on achieving higher returns than you could realistically expect, this could leave you in a vulnerable position should they not materialise. You could inadvertently affect your other financial lifestyle decisions, such as falling short on retirement savings or leaving yourself more susceptible to scams.

It’s worth remembering that investment returns are rarely guaranteed, so you should take your investment time frame, risk profile, financial goals, and any other assets you have into account when you invest. Then, you can target a realistic rate of returns in relation to these factors. 

2. It may be wise to avoid shortcuts

Throughout the book, Gatsby throws lavish parties in hopes of attracting Daisy. To his many elitist guests, it seems he has infinite wealth, and they speculate that he was a “German spy during the war”, a “nephew or cousin of Kaiser Wilhelm”, and even that he “killed a man once”. 

As Nick develops a friendship with Gatsby, he learns that he accrued his wealth through bootlegging during the prohibition period in the US. This quickly comes back to haunt the titular character, as Daisy changes her mind about their rekindled relationship when her husband, Tom, reveals the details of Gatsby’s shady past. 

Gatsby attempted to cheat the system and take shortcuts to earn his wealth. It’s a cautionary message that shows that you should ideally be patient and take a long-term approach to wealth generation.

By doing so, you could potentially increase your chances of positive returns. Indeed, data from Nutmeg shows that if you randomly picked one day to invest in global markets between January 1971 and July 2022, and then held this investment for 24 hours, you would have had a 52.4% chance of positive returns. 

If you kept this investment for a quarter, your chances of positive returns would have risen to 65.5%. Even more impressively, had you held onto this investment for 10 years, your chances would have increased to 94.2%.

Additionally, you could even benefit from the power of compounding returns by investing over the long term. Barclays gives a fitting example of this. 

Imagine you invest £10,000 and receive 2% returns for the first year. Assuming you don’t face any additional costs or charges, you’d receive returns of £200 after the first year. 

If you then reinvest this, you’d benefit from growth on the original £10,000, as well as the £200 from the first year. That means you’d receive £204 after the second year, assuming you still benefit from 2% growth. After 10 years, you would have earned £2,190.

As you can see, compounding returns snowball over time, so taking a long-term approach to investing is often beneficial. 

3. Trust the value of advice

The opening statement of F. Scott Fitzgerald’s influential novel sees Nick ponder some advice from his father. 

He says: “In my younger and more vulnerable years my father gave me some advice that I’ve been turning over in my mind ever since. ‘Whenever you feel like criticising anyone’, he told me, ‘just remember that all the people in this world haven’t had the advantages you have.’” 

As the book progresses, it becomes clear that Nick doesn’t follow this advice, as he is quick to judge others for their actions and choices. He realises that he’s been corrupted by the glitz and glamour of his new companions and seems to wish he’d followed his father’s teachings, highlighting the value of good advice.

When it comes to investing, the benefits of good advice are clear. Working with a financial adviser can free up your time to focus on other things, such as your family or work. Additionally, an adviser can coach you to make better financial decisions and improve your investing confidence. 

What’s more, advisers will personalise their advice to you. They have a vast range of resources that can help you make smart financial decisions based on your current situation, influenced by your concerns and aspirations. 

If Nick trusted the value of his father’s advice, he perhaps would have avoided the tragic events detailed in Fitzgerald’s magnificent novel that may weigh on the character’s consciousness for the rest of his life. 

Get in touch

If you would like some help devising and applying a strategy to your own investing, then we can help.

Please email us at info@investmentsense.co.uk or call 0115 933 8433 to find out more.

Please note

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.