The Wisdom Of Sir John Templeton
Legendary known and loved, investor and philanthropist, Sir John Templeton, passed away this morning, Tuesday, 8 July, 2008 in a Bahamian hospital from pneumonia at the age of 95.
Sir John Templeton is known (among other things) as being the one who introduced global equity investing to Canadians with his Templeton Growth Fund.
It was one of the first mutual funds to offer North Americans the ability to invest in foreign companies.
The fund was created in 1954 and, on average, has returned about 14.5% a year. An investment of $10,000 on day one of the fund would be worth nearly $5.8 million today, assuming the investor
had reinvested all distributions.
Though one of Sir John’s philosophies was “invest worldwide”, his success did not come only from investing in growing parts of the world – it was HOW he invested there.
One of his most famous quotes – and one that applies equally well to today’s stock markets is: “The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”
The Market Cycle of Emotions
In other words, Sir John sought out undervalued companies and sold his stake in them when their value shot up. “Focus on value because most investors focus on outlooks and trends,” he has said.
Another facet of Sir John’s investment approach was to ride out the market’s short-term movements to attain long-term gains. He always believed that holding a security over a five-year period meant that he did not need to listen to the day-to-day noise in the market place…
Sir John wouldn’t have flinched in today’s stock market environment!
Instead, he would have said that “just because a stock’s price has dropped, it doesn’t mean its value has evaporated.”
On a personal note, I had the honor and pleasure of meeting Sir John Templeton at his global offices in the Bahamas over 14 years ago.
At the time he was over 80 years old. (We were both much younger looking then!)
Every time I look at this picture of Sir John I am reminded of the 10 minutes that I was fortunate enough to spend with him.
I remember asking, “Sir John, in your opinion, what is the ONE thing a successful investor needs”.
He immediately replied: “Confidence, young man – you need confidence”!
Then I asked him to summarize his investing philosophy. And he smiled warmly at me and began by saying:
“These are great times”. “We’re going to miss these prices in a couple of years”. I believe that the more chances investors get to buy shares of quality companies when they go “go on sale” – as they do from time to time – the better off they will be in the long term”.
“Imagine that you have a partner in business – let’s call him Mr. Market.
Now, Mr. Market has some wonderful qualities…
He always has money to buy your shares, and he is always willing to sell his shares to you at some price.
Unfortunately however, Mr. Market is not emotionally balanced.
Some days he comes in bouncing off the walls, and offering to buy your shares at an extremely high price, while other days he comes in weeping, ready to sell you his shares at a very low price.
The one thing to remember is that Mr. Market is very emotional, and so DO NOT to make the mistake of getting irrationally exuberant or utterly depressed along with him!
Sell him shares when he offers you much for them, and buy shares from him when he is selling his shares cheaply.”
“Furthermore,” Sir John continued,
“In the short to intermediate term, the market is unknowable. In the long term – it is inevitable.”
“Picture if you will, the market as a child riding up an escalator while playing with a yo-yo. If you watch the yo-yo, you’ll see nothing but volatility.
The “secret” to successful long-term investing is to focus on the escalator, not the yo-yo.
I don’t know which direction the next 20% move in the market will take.
But, I am absolutely confident and certain about which direction the next 100% more in the market will be”…
And with that – my time with Sir John Templeton was up!
Now, remember that 1994 was also the year of the Mexican Peso “crisis”! Remember that?
Now, check out the link below…
This is the chart that you will see in every financial institution in North America…
It’s called the Andex chart and it represents what Sir John was telling me…
The TSX (Toronto Stock Exchange) is indicated by the “red line”.
See how it intersects in 1994 at about the “4,000” marker…today it is at 13,800…
Does this represent “value added” – of course it does!
What about the American, “S&P 500”?
Well, as you can see, in 1994 (represented by dark blue) it was closing in near the “5,000” marker…
today it is at 11,300…
Does this represent “value added” – of course it does!
Also, if you remember, in 1994 we had a 60 cent dollar in Canada. Sir John predicted to me that it would be stronger by the end of the year…and it was!
Now, look where it is all these years later!
Many days it is stronger than the US dollar!
So, why am I sharing this with you today?
Well, because Sir John Templeton’s words were as true then – as they are now!
It is all about confidence!
Never lose sight of your goals and dreams – and never, NEVER lose your confidence and give up.
The world had lost a great man today!
The fact should not be lost on you that he spent his whole life helping people attain their financial goals…
He spent his whole life creating the investment vehicles and investment philosophy that guided him and thousands of investors successfully to a better and richer financial world for themselves and for their families!
So, let’s all promise to embrace his investment philosophy…
Because after all, he would have wanted you to become wealthy!
So long Sir John!
You will be missed…
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