Sir John Templeton's Classic Quote: "Bull markets are born in pessimism, grow in skepticism, mature in optimism, and die in euphoria."

Introduction

John Marks Templeton was born in Winchester, Tennessee, and attended Yale University, where he served as an assistant business manager for the campus humor magazine Yale Record and was elected a member of the Elihu society. He won part of his tuition by playing poker, a game at which he excelled. He graduated at the top of his class in 1934. As a Rhodes Scholar, he attended Balliol College at Oxford University and earned a Master of Laws degree. He was a chartered holder of the CFA and a student of "Father of Value Investing," Benjamin Graham.

1. All Investments Are Global

Templeton became famous in the United States for advocating global diversification, but he did not invent the concept. After pursuing his Doctor of Juridical Science at Oxford, Templeton embarked on a whirlwind journey, visiting 35 countries in just seven months. During his travels, Templeton simply observed that there were too many opportunities outside the United States to ignore. This was in the 1930s, and to this day, scholars and financial advisors use peculiar equations and pie charts to demonstrate the rationale for international investing. For Templeton, it was just common sense.

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2. Always Take the Contrary Approach

"People always ask me where the good prospects are, but that's the wrong question," Templeton explained to Forbes in 1995. "The correct question is: 'Where are the prospects the worst?'" This is Templeton's famous "Maxim of Maximum Pessimism," which goes against almost every major decision we make in life: choosing a company to work for, choosing a neighbor to live next to, or choosing a person to marry. But it is precisely because of this that investing is so difficult, and the rewards of successful bets are so remarkable.

3. But Ensure the Fundamentals Are Intact

Identifying outdated industries or countries is just the starting point. The inevitable result of the Maxim of Maximum Pessimism is that the underlying long-term fundamentals must be sound. There was a reason for the high level of pessimism at Bear Stearns at one time.4. Let Valuation Be Your Guide

Many "sophisticated" international investors insist on dividing the world into a catalog of developed, emerging, and frontier markets, based on the classification system of Morgan Stanley Capital International. But before Morgan Stanley Capital International (MSCI) even existed, Templeton was killing it in the Japanese stock market in the 1960s. Was Japan developed or emerging at the time? It didn't matter. The Japanese stock market had a price-to-earnings ratio of 4, and the Japanese economy was growing like a wrecking ball.

5. Don't Be Afraid to Make Big Bets

At some point in the 1960s, Templeton had more than 60% of the Templeton Growth Fund's assets in Japan, a position that would get a manager fired on the spot at most mutual fund companies today. This is an extreme example, but investors should not be afraid to make bold bets when their research uncovers a tremendous opportunity. Moreover, Templeton was never a big fan of investment committees: "I don't know of any mutual fund that is managed by a committee with an outstanding record, just by accident."

6. Don't Rush Into Positions

Templeton was an investor, not a trader. But even for patient investors, watching cheap stocks get cheaper before the crowd arrives can be frustrating. Bottom-fishing financial stocks know this all too well today. In 1988, Templeton gave Forbes readers an important piece of advice that is especially relevant today: Always put your new investment ideas on a watch list, or take a small position before rushing in. If it's really cheap, there's no need to hurry.

7. Stay Away from the Crowd

"Outstanding performance cannot come from those who always belong to the herd," Templeton, though a contrarian, also kept a physical distance from the herd. One of his early investment partners, Templeton, Dobrow, and Vance, was located in the heart of Manhattan at Rockefeller Center, but Templeton spent his time in the Bahamas after moving there in the 1960s. Avoiding U.S. taxes was the main reason, but Templeton often cited the advantage of being far from the hustle and bustle of Wall Street in his decision-making. This was in the days before Bloomberg terminals, BlackBerry, and CNBC.

8. Don't Worry About the Direction of the Market

In a 1978 Forbes cover story, Templeton summarized it this way: "I never ask if the market is going up or down because I don't know, and it's not important. I search the country for stocks, asking: 'Where is the cheapest stock relative to what I think its value is?' Forty years of experience have taught me that you can make money without knowing the direction of the market."Summary

Fortune magazine called him "the greatest global stock picker of the century" in 1999.

1. Much of Templeton's success is attributed to his ability to maintain high spirits, avoid anxiety, and maintain discipline.

2. He rejected technical analysis of stock trading, instead favoring the use of fundamental analysis.

3. Templeton focused on purchasing stocks that he calculated to be significantly undervalued, holding them for an average of about four years until their prices rose to a fair market value before selling.

4. Templeton is known for his philosophy of "avoiding the herd" and "buying when there's blood in the streets."