The Templeton LettersIn a 1945 letter to investors, John Templeton discusses the importance of planned investment. Despite the letter being sixty-five years old, Templeton describes the first-time investor likely in the same way one would today:

It is a continual source of surprise . . . when speaking for the first time with investors with whom we have not spoken before, that so very many people seem never to have thought out comprehensively the nature and problems of investment management. So many go along, year after year, in a haphazard manner, buying a stock now and then whenever some situation, which particularly strikes their fancy, is called to their attention.

In a steady or rising market, the haphazard investor usually obtains profitable results and is lulled into a false sense of security. Then along comes a decline like those which culminated in 1921, 1932, 1938, and 1942 and the good record is more than wiped out, because he had no plan for capturing and locking up the profits in the happy days.

In a rising market, inexperienced investors may obtain the best results, results far surpassing the averages, because they often select highly volatile stocks. As every analyst knows, the fastest rises are to be expected in low priced stocks, stocks of marginal companies, and stocks of companies having large debt and preferred claims. It only takes a few minutes to select a list of stocks which is sure to surpass the market averages, if the average rises. The catch is that, if the market declines, those same stocks are the ones which fall with disastrous acceleration.

We will post more about Templeton’s thoughts on planned investment in the next few posts.