📜 16 Essential investment rules

by Sir John Templeton

Sir John Templeton is one of the best investors in the world who achieved a 15% annualized return over a period of 38 years. This means a $10.000 investment would have become $2.9 million (!).

You can learn a lot from him. Here are his 16 essential rules for investment success.

Rule 1: Invest for maximal total return

When you take investment decisions, you should take into account mental health, inflation and taxes.

The best investment strategy for you, is the one that fits your investment personality and makes you sleep well at night.

Rule 2: Invest. Don’t trade or speculate

Speculating is the fastest way to lose money.

Invest with a long-term mindset. The stock market is not a casino.

Rule 3: Remain flexible and open-minded

Every investment style has its advantages and disadvantages.

Stick to the strategy that fits you as an investor and remain open-minded to make adaptions if needed.

Rule 4: Buy low

Buy low, sell high. So simple in theory, so difficult in practice.

Buy stocks in times of maximal pessimism.

Rule 5: Search for bargains among quality stocks

In the end, the quality of a business is all what matters.

When you can buy a wonderful company at a fair price, you will end up with one hell of a result if you hold the stock long enough.

Rule 6: Buy value, not market trends or the economic outlook

Individual stocks can rise in a bear market and fall in a bull market.

Eventually, the stock price of a company will always follow its earnings.

Rule 7: Diversify in stocks and bonds

No matter how careful you are, you can neither predict nor control the future. That’s why you should diversify.

Rule 8: Do your homework

When you don’t do the work, you can’t expect to outperform the market.

You can copy the stock picks of another investor, but you can’t copy their conviction.

Rule 9: Aggressively monitor your investments

No bear market is permanent, and no bull market is permanent. 

Dare to take investment decisions when they matter most (in times of maximal pessimism and optimism).

Rule 10: Don’t panic

Times of extreme pessimism are usually the best times to invest in the stock market.

Rule 11: Learn from your mistakes

Forgive yourself your investment mistakes.

Determine what went wrong, and learn from it.

Rule 12: Begin with a prayer

Start your day with a clear mind. This will help you to make better investment decisions.

Rule 13: Outperforming the market is a difficult task

If you want to outperform, you must differ from the crowd.

Choose a good mentor and pick an investment strategy which managed to outperform the market for decades in the past.

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

There will always be uncertainty in the economy and the stock market.

Don’t let this stop you to invest your money.

Rule 15: A free lunch does not exist

You can’t generate investment returns without taking risk.

When everyone is euphoric and stocks seem to rise no matter what you invest in, the investment risk is the highest.

Rule 16: Do not be fearful or negative too often

As an investor, you should be an optimist.

For over 100 years, optimists have carried the day in US stocks and they will continue to do so for the next 100 years.

Used source for pictures: CLSA

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About the author

Compounding Quality is a professional investor which manages a worldwide equity fund with more than $150 million in Assets Under Management. We have read over 500 investment books and spend more than 50 hours per week researching stocks.