10 Maxims, from Sir John Templeton, a person who was a well-known investor and mutual fund manager. He became a billionaire by pioneering the use of globally diversified mutual funds. He is noted for buying 100 shares of each company for less than $1 ($16 today) a share in 1939 and making many times the money back in a 4 year period ( but I hope my customers can earn money 4 times period per month :P, learnt from my manager). However, he rejected technical analysis for stock trading, preferring instead to use fundamental analysis. He was named as " arguably the greatest global stock picker of the century" by Money Magazine.
There are 10 things we must keep in mind while trading in stock market, either using fundamental or technical analysis. These are very useful as we can minimize our risk. Always remember that, stock perfomance is basically from the emotional outcome of the major investors (players). We are not able control our emotion easily. For instance, when the good news come out, people would normally loss their control and follow others to buy the particular share, but they wont know that, when they bought the share, there are actually someone who already took profit and left the game. So, just read these 10 maxims from Templeton, and try to recall back, are you doing the same mistake again and again ?
1. Invest for real returns
The true objective for any long-term investor is maximum total real return after taxes.
2. Keep an open mind
Never adopt permanently any type of asset or any selection method. Try to stay flexible, open minded and skeptical. Long term top results are achieved only by changing from popular to unpopular the types of securities you favour and your methods of selection.
3. Never follow the crowd
If you buy the same securities as other people, you will have the same results as other people. It is impossible to produce superior performance unless you do something different from the majority. Buying when others are despondently selling and selling when others are greedily buying requires the greatest fortitude and pays the greatest reward.
4. Everything changes
Bear markets have always been temporary. And so have bull markets.
5. Avoid the popular
When any method for selecting stocks becomes popular, you will need to switch to unpopular methods.
6. Learn from your mistakes
'This time is different' are among the most costly four words in market history.
7. Buy during times of pessimism
Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.
8. Search worldwide
To avoid having all your eggs in the wrong basket at the wrong time, you should diversify. When you search worldwide, you find more better bargains than when you monitor only one nation. You also benefit from more safety thanks to diversification.
9. Hunt for value and bargains
Too many investors focus on outlook and trend. Therefore, more profit is made by focusing on value. In the stock market the only way to get a bargain is to buy what most investors are selling.
10. No-one knows everything
An investor who has all of the answers doesn't even understand the questions.
These 10 maxims are actually extracted from a blogger, "HowTze浩知". He also like to share something relating to the investment and finance.
sir john templetons 10 maxims