Lesson from the Investment Guru- Sir John Templeton

John Templeton investment lesson

Sir John Templeton was an Investor and first one who explored the Mutual funds, and become the billionaire with their set of principles that he followed in his entire life. He started his career in Wall street in 1937 and created the World’s Largest and Most successful investment “Templeton fund”, which later on he sold it to Franklin Group for $440 million.

Here are 5 Investment Principles that could be a good move for you to start an investment journey.

Invest for Maximum Total Return

This Statement of Sir John Templeton signifies that one need to look at the Real Yield (Real Return) on his Investments.

For Instance: Let’s say you park your surplus Money in a Fixed Deposit, which may be giving you a modest 8% interest every year, but this 8% return is not the actual returns that you will get at its maturity. That’s because inflation reduces its purchasing power.

Well if you don’t know aware what the inflation is , so i will give you just one example to give you gist of the concept

35 years ago Amul 500 gm of Butter would cost you  around Rs 6.50 , however, if you will buy today that would cost you around Rs 172-182.

So, imagine if you would have invested that Rs 6.50 with the Fixed deposit then, that amount would have amounted to 132 today. Though, this is considerably good return, you have made 20 times on your investment but could you buy from that Rs 132 a Amul Butter Today. No! Because inflation has reduced your purchasing power during the same tenure.

So, moral of the story is, before getting excited that you are getting the fixed return of 8-9% return on fixed deposit or any other alternative, remember that taxes and inflation should also be taken into consideration. There is an only one asset class that could tackle the problem of inflation, and that is Equity.

Invest – Don’t trade or speculate.

Here John is saying that Investments or stock market is not a Casino. However, if you treat it like one- like most of us did in 2007 and 2008, and moving out of his investments rapidly and investing when good or bad news floats, then the market will be a casino for you. And like what happens in casinos, you will lose eventually.

Buy Low

Now, this is a straightforward concept, and certainly, you would have heard about it many times. But it is very difficult to execute. When prices are high, and the market is doing good, a lot of investors, invest as we saw in the early 2008 crisis. And when the market crashed and had reached their multi-year low in late 2008, there was no one investing or buying anything.

Remember, post-Lehman Brother Bankruptcy, when every expert appearing on CNBC or other business channels were pronouncing the death of Sensex. When Sensex was at the 8000 levels, they were predicting that it would reach to 5000 levels. And now you know everything, where it is hovering around today.

Do keep in mind, if you buy at that time when no one is buying or investing, you will get the things cheap. Only then will do a lot better than other investors over the long term.

As Benjamin Graham put it – “Buy when most people…including experts…are pessimistic and sell when they are actively optimistic.”

Learn from your mistakes

Biggest difference between the most successful people and those who are not, that the former one have learnt from their mistakes

It does not make sense to cry about mistakes you did and then repeat them. I have seen many instances in the past, when investors stop their investing in Mutual funds or stocks after having having burnt their fingers.

The mistakes they made, that was to invest in the wrong way ( Like Buying a lot of insurance policies as investments, investing in a lot of NFO’s and investing in a lot of similar funds).As per Sir John, Forgive yourself for your errors you made and certainly do not try to recoup the losses by taking bigger risks; instead, turn each mistake into a learning experience.

Remain flexible and open-minded about types of investment

There are times to buy blue-chip stocks, cyclical stocks, mid and small-cap stocks, and there are times to sit on cash. The fact is there is no one kind of investment that is always best. So remain flexible and open to the demands of time and situation.


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