Timeless Wisdom of Sir John Tempeton
But he warned against taking even greater risks to try and recoup your loss all at once.
Sir John believed that the difference between successful investors and those that are not is that successful investors learn from their mistakes and the mistakes of others.
Anytime you hear someone on CNBC say it's a new era or it's different today, run for the hills.
This is a true investing gem: Templeton wrote “the investor who says, “This time is different”, when in fact it's virtually a repeat of an earlier situation, has uttered among the four most costly words in the annals of investing.”
Those investors are simply repeating the same mistakes of a past generation but without realizing it. Let’s not be those investors.
#5 – Don't Be Overconfident. I
In other words, always question your investment approach. Is it still valid? Sir John wrote, “Everything is in a constant state of change, and the wise investor recognizes that success is a process of continually seeking answers to new questions.”
A great example of this is how much the investment climate has changed surrounding energy MLPs. Investors poured tens of billions of dollars into funds investing in the sector, only to see losses mount as the price of oil plunged.
Believers in a permanently high plateau for oil prices were given a rude awakening as the price of oil plummeted from above $110 a barrel in the summer of 2013 to the mid-$20s a barrel in January 2016.
Other Templeton Insights
There are other insights to be gleaned from Sir John's vast experience.
Sir John Templeton was not a fan of trading - “the stock market is not a casino.” I am in total agreement with that statement.
Nor was he a fan of index funds - “If you buy the same securities everyone else is buying, you will have the same results as everyone else. By definition, you can't outperform the market if you buy the market.”
And as seen by the performance of the fund he ran, Templeton did an amazing job of beating the market averages over the long-term.
I tend to agree with Templeton on index funds. I have no problem with investors using them as a base, but they should not make up 100% of your portfolio.
Sir John also gave other common sense tips for investors. Such as: not forgetting about inflation and taxes when investing, doing your homework before investing, and always monitoring your investments.