We asked a few of Sir John’s family members and friends to share their perspectives on Sir John’s rule of “Buy Low, Sell High.”
Lauren Templeton and Scott Phillips, coauthors of Investing the Templeton Way, provide a modern look at Sir John’s investment rule:
Investors must always remember that stocks become a bargain when others are selling. Investors might sell their stocks for a number of reasons, but often it is due to fear, anxiety, and extreme pessimism. Likewise, fear, anxiety, and pessimism in the investing public usually coincide with an undue focus on poor near-term prospects. However, nothing is permanent in investing.
During the past ninety-two years there have been 19 bear markets in the S&P 500. During those past 1,100 months an investor would have spent just over 400 months in a bear market; so it reasonable for any investor to expect to spend approximately one third of their investment time horizon in a bear market. On the other hand, an investor should also expect to spend two thirds of their investment time horizon in a bull market. Most importantly, history also shows that stocks rise much higher in bull markets than they decline in bear markets.
Progress is advancing at an unprecedented rate across the human race. In emerging nations the impact of instant communication and the dissemination of knowledge has the potential to raise the standards of living for hundreds of millions of people over the course of the twenty-first century. Technologies unimaginable only a few decades ago are now common in most places. Those nations who most favor these continuing advancements and promote policies that foster innovation will continue to advance rapidly. These same nations will see a large rise in their standard of living accompanied by wealth that can support vibrant stock markets.
So while the challenges currently facing the world’s economies seem great, investors should focus on the long-term potential of mankind and remain confident in the future.