With market highs followed by pullbacks Sir John Templeton’s Rules reign

By Dian Vujovich

Okay. So the DJIA returned to a high not seen in five years–the S&P 500 did the same a few days ago—and today stocks are retreating. No big deal for any investor with experience. But if you’ve become nervous and jerky about the moves, now is exactly the time to review Sir John Templeton’s 16 Rules for Investment Success.

In case you may have forgotten, John Templeton, before he was a Sir, introduced the world to his own brand of investing whether buying stocks located in the U.S. or those in foreign markets. This gentleman was both a pioneer and investor extraordinaire with a contrarian’s point of view we all could learn from.

He died five years ago at the age of 95 but his name lives on among those who respect great investors. And, in the mutual funds his firm created that now fall under the FranklinTempleton family brand.

Before listing his rules for investing success, this paragraph from The Economist published after his death in 2008 is worth reflecting on:

“Sir John Templeton spent his life going against the flow. In September 1939, when the war-spooked world was selling, he borrowed $10,000 to buy 100 shares in everything that was trading for less than a dollar a share on the New York Stock Exchange. All but four eventually turned profits. In early 2000, conversely, he sold all his dotcom and Nasdaq tech stocks just before the market crashed. His iron principle of investing was “to buy when others are despondently selling and to sell when others are greedily buying”. At the point of “maximum pessimism” he would enter, and clean up…..”

With that in mind, here are Sir John Templeton’s 16 Rules for Investment Success:

1.Invest for maximum total real return.

2. Invest — Don’t trade or speculate.

3. Remain flexible and open minded about types of investment.

4. Buy Low.

5. When buying stocks, search for bargains among quality stocks.

6. Buy value, not market trends or the economic outlook.

7. Diversify. In stocks and bonds, as in much else, there is safety in numbers.

8. Do your homework or hire wise experts to help you.

9. Aggressively monitor your investments.

10. Don’t Panic.

11. Learn from your mistakes.

12. Begin with a Prayer.

13. Outperforming the market is a difficult task.

14. An investor who has all the answers doesn’t even understand all the questions.

15. There’s no free lunch.

16. Do not be fearful or negative too often.