Friday, August 7, 2009

”To buy when others are despondently selling ... pays the greatest reward”

Although I do not share his interest in spiritual matters, I do believe in Sir John Templeton's approach to investing: buy low, and hold.

While standard stock-buying advice is “buy low, sell high”, Templeton took this strategy to the limit, by picking countries, sectors, and companies precisely at the moment when they were hitting rock-bottom, or what he called “points of maximum pessimism.”

It is said that he made his fortune by buying shares in each of the 104 companies listed at one dollar or less in the New York stock exchange when the Second World War began in 1939 (nowadays, this would be better accomplished by buying a broad electronically-traded fund, ETF; for example, the iShares Russell 3000 Value Index ETF, up 58 % since March 9, 2009).

Templeton sold significant holdings before the technology bubble burst in 2000, and warned several years ago that real estate prices were dangerously high (as did I, I should immodestly add).

Here are some obituaries published when he passed away (on July 8, 2008).

Some of his aphorisms and sayings:

- ”To buy when others are despondently selling and to sell when others are greedily buying requires the greatest fortitude and pays the greatest reward”.

- ”Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.”

- “The four most expensive words in the English language are ‘This time it’s different.’”

- "How little we know, how eager to learn”.

- "In my 45-year career as an investment counselor, humility did show me the need for worldwide diversification to reduce risk".

No comments:

Post a Comment