Sir John Templeton Investing Advice from 1993
The following rules were written by Sir John Templeton in 1993. Today, 30 years later, his rules and insights still ring true for the slow and methodical investor. These lessons are not mine, but his. And we have Sir John Templeton to thank for writing and them making them public for all:
- Invest for maximum total real return
This means considering returns after taxes and inflation. Protecting purchasing power is crucial, as inflation erodes wealth over time. One of the biggest mistakes is over-investing in fixed-income securities. - Invest—don’t trade or speculate
The stock market is not a casino, but frequent trading, short selling, and options speculation often lead to losses. Long-term investors who remain patient and avoid unnecessary commissions tend to perform better. - Remain flexible and open-minded about types of investment
No single type of investment is always best. Market trends change, and flexibility allows investors to capitalize on new opportunities. - Buy low
Most investors do the opposite—buying at market highs and selling at lows. The best opportunities arise when fear dominates the market. Buying undervalued stocks takes patience and the ability to go against the crowd. - When buying stocks, search for bargains among quality stocks
A strong market position, technological leadership, competent management, and financial strength define quality. Bargains exist even among high-quality stocks, but not all low-priced stocks are good investments. - Buy value, not market trends or the economic outlook
Stock prices move independently of market trends. Focus on individual companies rather than trying to predict the economy or broad market movements. - Diversify. In stocks and bonds, as in much else, there is safety in numbers
Unpredictable events can harm even the best companies. Diversifying across industries, risk levels, and countries reduces vulnerability to unexpected shocks. - Do your homework or hire wise experts to help you
Investigate before investing. Study businesses to understand their earnings potential and assets. Investing blindly or based on tips is a recipe for losses. - Aggressively monitor your investments
No bull or bear market is permanent. Companies and industries change, and investors must stay informed to adapt. No investment is forever. - Don’t panic
Market crashes happen. Selling in a panic often locks in losses. Instead, reassess your holdings and only sell if better opportunities exist. - Learn from your mistakes
Every investor makes mistakes. The key is to learn from them, avoid repeating errors, and not take excessive risks to recover losses. - Begin with a prayer
A calm and clear mind leads to better decision-making. Starting with a prayer can help avoid emotional mistakes. - Outperforming the market is a difficult task
Consistently beating the market requires making better decisions than professional investors. Passive index investing is often a strong alternative. - An investor who has all the answers doesn’t even understand all the questions
Overconfidence leads to failure. Markets evolve, and humility in learning is essential for long-term success. - There’s no free lunch
Sentimental investments, IPO hype, and stock tips often lead to poor decisions. Always conduct thorough research before investing. - Do not be fearful or negative too often
History shows that stocks tend to rise over time. While downturns occur, long-term optimism and patience lead to wealth accumulation.
Four additional lessons from Sir John Templeton
- “The four most dangerous words in investing are: ‘This time it’s different.’”
Markets move in cycles. While circumstances change, human nature and economic fundamentals remain consistent. - “If you want to have a better performance than the crowd, you must do things differently from the crowd.”
Outperformance requires independent thinking. Following popular sentiment usually leads to average or below-average results. - “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”
Understanding market psychology helps investors make better decisions. The best time to invest is when fear dominates. - “Help yourself by helping others. You will achieve your own goals faster by genuinely trying to help others succeed.”
Generosity and long-term thinking extend beyond investing. Success is often a byproduct of serving others.