Sir John Marks Templeton was a legendary investor who founded and managed the famous Templeton Growth Fund. He was a mutual-fund titan who pioneered the use of globally diversified mutual funds.
Known as a contrarian and a value investor, Templeton searched worldwide for good bargain stocks. Rejecting technical analysis and being fundamentally orientated, he was also a renowned philanthropist who established the John Templeton Foundation, the Templeton Prize (research in philosophical advancements and spiritual discoveries) and the Templeton College of the University of Oxford.
Here are his maxims and principles, known as the Templeton Touch:
(1) For all long-term investors, there is only one objective – “maximum total real return after taxes.”
(2) Achieving a good record takes much study and work, and is a lot harder than most people think.
(3) It is impossible to produce a superior performance unless you do something different from the majority.
(4) The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.
(5) 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.
(6) 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.
(7) Bear markets have always been temporary. Share prices turn upward from one to twelve months before the bottom of the business cycle
(8) 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.
(9) In the long run, the stock market indexes fluctuate around the long-term upward trend of earnings per share.
(10) In free-enterprise nations, the earnings on stock market indexes fluctuate around the replacement book value of the shares of the index.
(11) If you buy the same securities as other people, you will have the same results as other people.
(12) 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.
(13) Share prices fluctuate much more widely than values. Therefore, index funds will never produce the best total return performance.
(14) Too many investors focus on “outlook” and “trends.” Therefore, more profit is made by focusing on value.
(15) If you search worldwide, you will find more bargains and better bargains than by studying only one nation. Also you gain the safety of diversification.
(16) The fluctuation of share prices is roughly proportional to the square root of the price.
(17) The time to sell an asset is when you have found a much better bargain to replace it.
(18) 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
(19) 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 types of securities you favor and your methods of selection.
(21) The best performance is produced by a person, not a committee.
(22) If you begin with prayer, you can think more clearly and make fewer stupid mistakes.
If you are interested in reading more about Templeton and his methods, two books might come in handy:
Investing The Templeton Way by Lauren C. Templeton & Scott Phillips, McGraw-Hill, 2008
Templeton’s Way With Money by Jonathan Darvis & Alasdair Nairn, Wiley, 2012