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Finance 101: Templeton's 16 Rules For Investing
John Templeton was one of the 20th century's most successful investors.
"This time is different!" This has been a common refrain for the current bitcoin market cycle. With the entrance of institutional money and an ETF likely just around the corner, we're seeing all kinds of wild predictions once more. Over the centuries, though, investors have found that value is to be accumulated by following a few simple, sane rules, rather than throwing all the cards in the air and expecting the market to follow them.
John Templeton was one of the most prominent and successful investors of the last century. He began his career by buying distressed shares during the Great Depression. After the Second World War, he launched the Templeton Growth Fund, which averaged growth of over 15% per year for 38 years, though he is perhaps now best known for his association with global investment firm Franklin Templeton.
We take a look at Templeton's 16 Rules for Investment Success—most of which are equally applicable to the crypto markets today as they were for Templeton himself, picking stocks during the Great Depression.
- Invest for maximum total real return: Consider both capital appreciation and income, and don't overlook the impact of inflation.
- Invest–don't trade or speculate: Focus on long-term investment rather than short-term trading. It's too easy to get shaken out of the market. (In other words, HODL.)
- Remain flexible: Be open to changing your investment strategies based on new information. How many people missed the opportunity to sell last cycle because they were wedded to the idea of $100k bitcoin? How many people missed the chance to buy because they were sure that $10k was incoming?
- Buy low: Look for opportunities when prices are low and sentiment is negative. This sounds obvious, but being a contrarian is hard.
- When buying stocks, search for bargains among quality stocks: Seek undervalued stocks of fundamentally strong companies. In the crypto world, discounted BTC may be a better prospect than a crashing meme coin.
- Buy value, not market trends or the economic outlook: Base decisions on intrinsic value rather than popular trends. While it's tempting to look at the macro picture (inflation, interest rates, QE...), Bitcoin's use case as a decentralized store of value is ultimately independent of these.
- Diversify: do not put all your eggs in one basket: Spread investments across various assets to reduce risk. That might mean cash and TradFi assets as well as different cryptos and stablecoins.
- Do your homework or hire wise experts to help you: Thoroughly research potential investments or seek advice from knowledgeable professionals. YouTube permabulls who evaporate in a bear market don't qualify.
- Aggressively monitor your investments: Regularly review and reassess your portfolio. (Be thorough, but not obsessive...)
- Don't panic: Avoid making impulsive decisions based on short-term market fluctuations. Decisions made under stress are more likely to be bad ones.
- Learn from your mistakes: Analyze past decisions, both successful and unsuccessful, to improve future choices. This time is not fundamentally different, and insights from the past can help inform future decisions, if you allow them to.
- Begin with a Prayer: Encourage a sense of humility and gratitude.
- Outperforming the market is a difficult task: Understand that consistently beating the market is challenging. Few manage it successfully.
- An investor who has all the answers doesn't even understand all the questions: Acknowledge the complexity of financial markets. Be wary of those who claim they know the future.
- There's no free lunch: Be skeptical of investments promising high returns with little risk. In crypto, that should go without saying.
- Do not be fearful or negative too often: There will always be wars, social unrest, economic turmoil. More money is lost waiting for a better time to invest than it is investing at the wrong time.
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