Sir John Templeton (1912- 2008) is best known for introducing international investing to U.S. investors. He was an American-born British investor, banker, fund manager, and philanthropist. In 1954, he entered the mutual fund market and created the Templeton Growth Fund, which averaged growth over 15% per year for 38 years. A pioneer of emerging market investing in the 1960s, Money magazine named him “arguably the greatest global stock picker of the century” in 1999.
Templeton attributed much of his success to his ability to maintain an elevated mood, avoid anxiety and stay disciplined. He rejected technical analysis for stock trading, preferring instead to use fundamental analysis.
Despite the name of his flagship fund, Templeton Growth Fund, he was more a practitioner of value investing rather than growth investing.Templeton focused on buying stocks he calculated were substantially undervalued, holding them until selling when their price rose to fair market value. His average holding period was about four years. He believed holding assets priced above fair market value in hopes they would further increase in price was speculation, not investing. However, Templeton did not buy stocks merely because they were undervalued but also took care investing in companies he determined were profitable, well-managed and with good long-term potential. (For more details see wikipedia)
Over the course of his career, he collected a list of rules to invest by, which he first wrote about in a 1993 article for World Monitor titled “16 Rules for Investment Success.” An expanded list of 22 maxims was later published in The Templeton Touch.
John Templeton’s 22 maxims
- For all long-term investors, there is only one objective maximum total real return after taxes.
- Achieving a good record takes much study and work, and is a lot harder than most people think.
- It is impossible to produce a superior performance unless you do something different from the majority.
- The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.
- To put Maxim 4 in somewhat different terms, in the stock market the only way to get a bargain is to buy what most investors are selling.
- To buy when others are despondently selling and to sell when others are greedily buying requires the greatest fortitude, even while offering the greatest reward.
- Bear markets have always been temporary. Share prices turn upward from one to twelve months before the bottom of the business cycle.
- If a particular industry or type of security becomes popular with investors, that popularity will always prove temporary and, when lost, won’t return for many years.
- In the long run, the stock market indexes fluctuate around the long-term upward trend of earnings per share.
- In free-enterprise nations, the earnings on stock market indexes fluctuate around the replacement book value of the shares of the index.
- If you buy the same securities as other people, you will have the same results as other people.
- The time to buy a stock is when the short-term owners have finished their selling, and the time to sell a stock is often when short-term owners have finished their buying.
- Share prices fluctuate much more widely than values. Therefore, index funds will never produce the best total return performance.
- Too many investors focus on outlook and trend. Therefore, more profit is made by focusing on value.
- If you search worldwide, you will nd more bargains and better bargains than by studying only one nation. Also, you gain the safety of diversification.
- The fluctuation of share prices is roughly proportional to the square root of the price.
- The time to sell an asset is when you have found a much better bargain to replace it.
- When any method for selecting stocks becomes popular, then switch to unpopular methods. As has been suggested in Maxim 3, too many investors can spoil any share-selection method or any market-timing formula.
- Never adopt permanently any type of asset or any selection method. Try to stay flexible, open-minded, and skeptical. Long-term top results are achieved only by changing from popular to unpopular the types of securities you favor and your methods of selection.
- The skill factor in selection is largest for the common-stock part of your investments.
- The best performance is produced by a person, not a committee.
- If you begin with prayer, you can think more clearly and make fewer stupid mistakes.