In a 1945 letter to investors, John Templeton discusses the importance of planned investment. In this section of the letter, he details how one can balance his or her investments for a better payoff twenty years down the road.
In simplest terms, the “balance” of the investment fund is shifted gradually step-by-step away from stocks and into bonds when the stock market rises and then subsequently back from bonds into stocks when the market declines. The result is a moderate growth in the invested funds over each completed market cycle, without the need for any predictions of trends or turning points. An investment plan incorporating these principles assures you that you will be ready and able to buy stocks in periods of gloom when others are selling and that you will be selling when prices are reaching new high levels and optimism abounds.
Any sound long-range investment program requires patience and perseverance. Perhaps that is why so few investors follow any plan. Years may go by before the risks of haphazard stock purchasing are revealed by losses. And years may go by before experience proves the increased safety and enduring growth achieved by planning. Over a period of 20 years, however, it is not too much to expect that investment planning may cause the invested funds to double.