John Templeton’s 16 Rules For Investment Success

“If we become increasingly humble about how little we know, we may be more eager to search.” – Sir John Templeton

John Templeton was one of the greatest investors of all-time. He was a well-known value investor and a natural contrarian who was successful at buying during times of maximum pessimism.

Here’s one of his legendary investment tales via Business Week:

In 1939, when World War II began in Europe, the 26-year-old investor borrowed $10,000 and bought 100 shares each in 104 companies that were selling at $1 a share or less, including 34 in bankruptcy. A few years later, he made large profits on 100 of the companies; four turned out to be worthless.

Here’s another example of his investment prowess:

Sir John said his investment record improved after he distanced himself from Wall Street and no longer worried about the tax consequences of his decisions. He was an early investor in Japan in the 1960’s and later in Russia, China and other Asian markets. He sold large holdings before the technology bubble burst in 2000, and warned several years ago that real estate prices were dangerously high.

I’m sharing these stories because I recently came across an article he wrote a long time ago on his investment rules for success. The best investors are not only intelligent but they have seemingly complete control over their emotions.

This allows them to go against the grain, but not just for the sake of being a contrarian. That doesn’t always work as not all investments come back from the dead. To be a truly great contrarian investor you have to look for value not just lower prices. Templeton was a master at finding value in the rubble.

Here are John Templeton’s 16 Rules for Investment Success:

1. Invest for maximum total real (after-inflation) return
2. Invest – don’t trade or speculate
3. Remain flexible and open-minded about types of investments
4. Buy low
5. When buying stocks, search for bargains among quality stocks
6. Buy value, not market trends or the economic outlook
7. Diversify. In stocks and bonds, as in much else, there is safety in numbers
8. Do your homework or hire wise experts to help you
9. Aggressively monitor your investments
10. Don’t panic
11. Learn from your mistakes
12. Begin with a prayer
13. Outperforming the market is a difficult task
14. An investor who has all the answers doesn’t even understand all the questions
15. There’s no free lunch
16. Do not be too fearful or negative too often

These rules actually first appeared in The Christian Science Monitor all the way back in 1933. And they are all still relevant today. That is the definition of timeless advice.

Read the entire story in the link below if you are interested in learning more about his thoughts on each of the rules.

Sources:
Franklin Templeton
Business Week