Biznews Classic: Sir John Templeton’s 16 Laws of Investment

By Alec Hogg

Charlie Munger reckons there is much we can learn from dead guys. Todd Buchholz wrote an entire book along the same lines. One of the world’s major investment companies, Franklin Templeton, clearly thinks the same way. The video below commemorates what would have been Sir John Templeton’s 100th birthday (he died aged 95, in 2006). It is a classic.

Templeton is one of the great minds of the investment world. His genius was to see the globe as an entire opportunity, pioneering the trend by investing funds into Japan in the 1960s. Like Warren Buffett, he believed in concentrating his portfolio, but also to have a spread of investments so that a single bet didn’t hurt if it went wrong. And, significantly, Templeton was deeply spiritual. He believed in starting each day with a prayer – and asking for guidance before every major decision.

Templeton is also remembered for his 16 Laws of Investment. Here they are:

  1. Invest for maximum total real return
  2. Invest – don’t trade or speculate
  3. Remain flexible and open minded about types of investment
  4. Buy low
  5. When buying, 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 – ever
  11. Learn from your mistakes
  12. Begin with a prayer
  13. Remember that outperforming the market is a difficult task
  14. Any investor who has all the answers doesn’t even understand the questions
  15. There’s no free lunch
  16. Do not be fearful or negative too often

 

Sir John Templeton‘s 100th birthday tribute “Each of us should try to make our life beneficial. We don’t know why God put us here. It may have been that we’re supposed to make the best use of our life to serve humanity in general. I used the talents that I thought God gave me, to select investments for people.”

John Marks Templeton was born November 29th, 1912 in the small town of Winchester, Tennessee. From his mother, he learned the value of education and to explore new ideas with a perpetual sense of optimism. His father was a lawyer and entrepreneur who taught young John his earliest lessons in finding opportunities where others could see none. John was an exceptional student who graduated first in his high school class and was the first in his town to attend college.

His determination and scholastic achievements took him to Yale University but unfortunately, the Depression soon drained the family’s finances.

“When I was a second-year at Yale, my father told me that he couldn’t give me even $1.00 to go back to college. I thought that was tragedy but it turned out to be one of the greatest blessings anybody ever gave me, because it made me an adult. It made me stand on my own two feet. It meant I learned to work hard because working hard was the way to produce a better result.”

At the age of 18, John had to rely on his own entrepreneurial skills to pay for the rest of his college education. After earning a Master’s degree in law, John Templeton set out to tour the world. He visited 40 countries and returned home in 1937, determined to build an investment business with a global perspective.

“The growth of prosperity in the world will be greater when we can all invest in each other’s progress. That’s a very inspiring idea, to me.”

John started working on Wall Street in 1937 and by 1940, he had created his own investment company.

“I thought that, to serve the people in the future (the investors in the future) I should team up with the best neutral foreign organisation I could find in the world. After talking with a vast number of different, famous institutions, we selected Franklin Resources of San Mateo, California.”

My first memory of Sir John was back in 1991 when we were negotiating the merger back in the Templeton offices in Nassau and we always knew what an incredibly successful investment organisation he ran. What we didn’t know was what a tough negotiator Sir John was. He really went over every piece of paper and every merger document. I remember sitting there at 11 o’clock at night and just being amazed at how he could work for 14 hours, sitting there going over page 798 and he’d initial every page – just an amazing person. This merger (which seems common today) at the time, was one of the first and it really, has been a tremendous success – Greg Johnson

“It makes me feel very humble because throughout all of my 83 years, I’ve had tremendous help from other people. It’s obvious to you, I’m sure, that the team, the brains, and the wisdom get better every year and I hope it will be that way year after year, even after I’m gone.

When you’re trying to buy low and sell high, you must be sure that you don’t listen too much to your competitors. A stock never goes down to a very low price except for one reason, and that is that almost everybody’s trying to sell it. You have to be prepared with the independence of viewpoint, to be able to go out against the crowd – to do the opposite of what almost all people are doing, including the experts – otherwise you don’t get in at a ba

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