10 RULES I LEARNED FROM JOHN TEMPLETON

Sir John Templeton was the funder of Templeton Growth Fund and one of the greatest investor and trader in the 20th century. He was the friend and mentor of Jim Rogers. He was always very concerned about the technical analysis and used to be a real fundamental guru and great stock picker. He always had concerned about the herd movements and tried to ignore those traps. He used to be a real contrarian and tried to buy when the pessimism was high and everybody sold. Here is one example about his trading approach. At the World War II, in 1945 he borrowed 10,000$ and bought 140 stocks under 1$ in the Wall Street. Finally, he made 40,000$ profit and lost only on four of them. He did it when the sentiment was fully bearish in the NYSE.

He lived a very humbled life like Warren Buffett he drove his own car, never flight on business class or private jet and he donated some project as a philanthropist with more than 1 billion dollar. He was a great poker player and he loved to travel, after the college he travelled around the world. He only died one and a half year ago in November 2012.

Here are below I collected 10 great rules which I learned from him and really do guide me in the trading:

1. Buy the pessimism. Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy and the time of maximum optimism is the best time to sell.
2. Be contrarian. If you want to have a better performance than the crowd, you must do things differently from the crowd.
3. You have to have a bargain-hunting mentality. We have to always find the cheap stocks and forget the popular and expensive ones. 
4. Broad social and political awareness. Read and think a lot about the major mainstream social trends and try to understand why the mass is pessimistic or optimistic. 
5. Flexibility. Don’t hold your position if your are losing on it. Close that and open in the opposite direction. Never argue with the price. 
6. Patience. Patience is the best friend of a good trade it helps you don’t jump too early in positions. 
7. Simplicity. Your system needs to be simple and primitive. Complexity breath confusion. 
8. Take always advantages of the crisis events. Like it happened in the past Black Monday 1987 Crash, United Airlines LBO Failure (1989), Persian Gulf War (1990), Tequila Crisis (1994), Asian Financial Crisis (1997-98), September 11, Financial Crisis 2008-2009 
9. Diversify your investments. Don’t buy only US stocks or German Bunds or whatever. Allocate the risk in different assets and in different countries. 
10. Invest into long term. He said before this century is over, the Dow Jones Industrial Average will probably be over one million versus around 10,000 now. So for the long-term, the outlook is tremendously bullish if you buy stocks blindly to keep for a century.

The BFM Assets Team.