Sir John Templeton (1912-2008) may be gone, but he’s still remembered as one of the greatest investors of all time. For one, Sir John popularized the idea of investing globally for the
He launched his flagship Templeton Growth Fund when most didn’t even think of investing outside the US borders. The pioneering fund racked up an enviable track record, returning an average of 13.8 percent annually from 1954
To this day, many of Templeton’s timeless investing principles still apply. Below are a few of them. They come courtesy of the Franklin Templeton website and the Templeton Foundation.
#1: Buy low
Seems obvious, right? But in reality, many investors do the opposite. They chase hot sectors that increase drastically.
Sir John always scoured the globe for bargains. He told investors to buy when everyone else is selling, when things look darkest and when all the experts say a certain investment is too risky. Further on, Templeton advised us to “buy when others are despondently selling and sell when others are avidly buying”.
He would often say, “People are always asking me where the outlook is good, but that’s the wrong question. The right question is: Where is the outlook most miserable? The obvious application of this concept in practice is to avoid following the crowd.”
#2: Invest for the
Hand in hand with value investing is investing for the long term. Templeton said, “Experience teaches us that one of the most common errors in selecting stocks… is the tendency to emphasize only on the most obvious factor – namely, the temporary outlook for sales and profits of the company.” Too many investors spend too much time looking at the short-term market outlooks and trends.
Sir John didn’t believe that one specific investment is always best – although over the long term, stocks do outperform. More importantly, no one can predict the future. If you’re focused too much on one company, sector or country, your portfolio is at risk. Sir John advised us to diversify by risk, industry and country. He would say, “In stocks and bonds, as in much else, there is safety in numbers.”
#4: Learn from past mistakes
Everyone makes mistakes when investing, even Sir John. As he said, “The only way to avoid mistakes is to not invest –which is the biggest mistake of all.” Instead, Templeton advised us not to become discouraged by loss and especially not to take even greater risks and try to recoup our losses all at once. He believed that the difference between successful and unsuccessful investors is that successful investors learn from their mistakes and the mistakes of others. You should run for the hills anytime you hear someone saying “it’s a new era or that it’s different today”. According to Sir John, “The investor who says, ‘This time is different,’ when in fact it’s virtually a repeat of an earlier situation, has uttered among the four most costly words in the annals of investing.”
#5: Don’t be overconfident
In other words, always question your investment approach. Is it still valid? Sir John wrote, “Everything is in a constant state of change and the wise investor recognizes that success is a process of continually seeking answers to new questions.”
Other Templeton insights
Of course, there are plenty more insights to be gleaned from Sir John’s vast experience. He wasn’t a fan of trading – “The stock market is not a casino” – or of index funds – “If you buy the same securities everyone else is buying, you will have the same results as everyone else. By definition, you can’t outperform the market if you buy the market.”
He also gave other common sense tips for investors, such as remembering inflation and taxes when investing, doing your homework and always monitoring your investments.