10 Investment principles
Both Money magazine and Forbes consider Sir John Templeton a reasonable and successful investor. Why? Because of his administrative intelligence in investment. His international recognition led him to be dubbed the “dean of global investing”, and he’s considered one of the most important figures in the history of investment management. John Templeton and his organization, Templeton Mutual Funds, gave the world excellent advice for a better financial culture in investment matters. We gathered here the 10 principles of Templeton, which despite having been written decades ago, continue to maintain validity and value.
1.- Invest for real returns
The only reason why an investor decides to buy is because he is looking to obtain maximum return after interest. It’s a clear and evident objective. Any investment strategy that ignores tax and inflation conditions is incomplete and therefore risky or inaccurate.
2.- Having an open mind
Flexibility is a characteristic of great investors. An open-minded investor is capable of perceiving better results in the long run, since instead of buying what is trending and selling what’s not, he’s the one who sells what’s trending and buy’s what’s not. Not being attached to strategies or financial instruments in particular as well as an active management can guarantee a successful path.
3.- Not following the herd
The only way to get results that are different from the rest is by doing things different from the rest. You can’t do the same as everyone else and expect different results. This principle is also true in investment and requires a great deal of willpower. In the long run, buying when the majority is selling, and selling when the majority is buying, yields better results.
4.- Awareness that everything is constantly changing
The rise and fall in the markets is permanent. Everything that goes up must come down, and the reverse is also true. Therefore, we must understand that the current price situation is temporary, and although it is true that some types of industries or financial instruments may become popular amongst investors, this popularity is transitory, and the drop in prices could last for several years.
5.- Avoid Trends
At any given time. When a selection method or a specific financial instrument has become popular amongst investors, we have a clear signal that it is time to change. When a particular way of trading becomes popular, the market reacts differently, and therefore stops being effective, and is one of the reasons why the market doesn’t work with particular formulas.
6.- Learn from Mistakes
Repetitive behavior can ruin any investment plan and bankrupt investors. It’s not bad to fail, but you have to know how to get up and avoid tripping with the same stone twice. Take note of what happened and reorganize.
7.- Buy on pessimistic times
When bad news is abundant, great markets are born, in times of skepticism they grow, mature with optimism and die with euphoria. When pessimism floods the markets, it’s the best time to buy, and when investors are in euphoria, it’s the ideal time to sell.
8.- Find the low price value
The only way to make an excellent investment in the stock market is to buy what everyone is selling, economically speaking, when there is more supply, the prices are lower. What achieves more profitability is the search for value, since more investors focus on finding perspectives and trends.
9.- Search Globally
Diversifying is one of the most essential maxims of investing. Have you heard the saying not putting all your eggs in one basket? Well, here this saying makes sense. Diversifying does not assure you of finding better investment options, seeking and participating in other nation’s markets diversifies risk and gives better security to capital.
10.- Accepting you can’t know it all
It is impossible that an investor has all the answers. A presumptuous attitude is an imminent path to disaster. Constantly learning and working with the market and it’s reactions is the only way to invest properly.
Article translated by Rodolfo Schaefer