Timeless Wisdom of Sir John Tempeton
Templeton wrote “buy when others are despondently selling and sell when others are avidly buying.”
He would often say, “People are always asking me where the outlook is good, but that's the wrong question. The right question is: Where is the outlook most miserable? The obvious application of this concept in practice is to avoid following the crowd.”
#2 – Invest for the Long-Term.
Hand-in-hand with value investing is investing for the long-term. Templeton said, “Experience teaches us that one of the most common errors in selecting stocks… is the tendency to emphasize only the most obvious factor – namely the temporary outlook for sales and profits of the company.”
In other words, ignore Wall Street's emphasis on quarterly earnings reports. Too many investors spend too much time looking at the short-term market outlooks and trends.
Instead focus on long-term trends in sectors such as technology and medicine to spot growth areas to invest in.
#3 – Diversify.
Sir John believed there was no one kind of investment that is always best. Although over the long-term, stocks do outperform other asset classes such as cash and bonds.
No one can predict the future. So, if you're focused too much on one company or sector or country, events can happen that could devastate your portfolio. Sir John advised to diversify by risk, by industry and by country. He would say, “In stocks and bonds, as in much else, there is safety in numbers.”
#4 – Learn from Past Mistakes.
Everyone makes mistakes investing, even Sir John. As he said, “the only way to avoid mistakes is to not invest – which is the biggest mistake of all.”
Templeton urged investors not to become discouraged.