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John Templeton’s Rules for investing

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Invest for maximum total return: Investors often make the mistake of investing too much in fixed-income securities. This is particularly true in today's environment where many fixed-income securities offer negative returns to investor after factoring in inflation.


Invest - do not trade or speculate: Investors are people who buy for fundamental value. Speculators are those who buy in the hope of selling later to someone at high prices.


Remain flexible and open-minded about types of investments: Never adopt permanently any type of asset or selection method. Try to stay flexible, open minded and skeptical. When any method for selecting stocks becomes popular, then switch to unpopular methods.


Buy low: One of the great ironies of the stock market is that when stocks drop in price, or "go on sale", they attract fewer buyers. Conversely, when stocks become more expensive, they attract increasing numbers of buyers because of their popularity. To get a bargain price, you've got to look for where the public is most frightened or pessimistic.


When buying stocks search for bargains among quality stocks: The best bargains are not stocks whose prices are simply down the most, but rather stocks having the lowest prices in relation to possible earning power of future years. Look for companies with high profit margins, high returns on capital, and a sustainable competitive advantage.


Buy value: Not market trends or economic outlook. Too many investors focus on the market trend or economic outlook. But individual stocks can rise in a bear market and fall in a bull market. Therefore, more profit is made by focusing on value.


Diversify: The only investors who shouldn't diversify are those who are right 100 per cent of the time. If you are diversified among different forms of wealth, nations, industries and companies, you will be safer in the long run.


Do your homework or hire an expert to help you: There is no substitute for doing your own homework on a company. At the same time, it remains a tremendous undertaking both from a time and skill standpoint to successfully purchase individual stocks for one's own brokerage account. For this reason, you may choose to hire an expert who has a similar investment philosophy to your own.


Don't panic: During a market correction, DO NOT PANIC. Don't rush to sell the next day. The time to sell is before the crash, not after. Instead, study your portfolio. If you didn't own these stocks now, would you buy them at current prices? The only reason to sell stocks after a market sell off is to buy other more attractive stocks.


Invest for the long term: One of the most common errors in selecting stocks for purchase, or for sale, is the tendency to emphasise the temporary outlook for sales and profits for the company. Avoid this temptation and invest with a long-term perspective.


There is NO free lunch: Never invest on sentiment and never invest solely on a tip. Investing requires an open mind, continuous study, and most of all, critical judgment. There are no free lunches!


Do not be too negative: Although Sir John M. Templeton coined the phrase "maximum pessimism" to explain the best time to invest, he remains one of the world's biggest optimists. Look for bargains and opportunities during times of market malaise. You will be rewarded in the long run for not following the crowd.

Happy Investing!!

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