“Do not gamble. Buy good stocks. Keep them on until they rise and sell with a profit. If the shares are not going to rise, you should not buy them. “Timeless investing advice of one of the biggest investors in the early years, John Templeton.
But John Templeton has more timeless investing advice.
Success on the market is achieved by buying low and selling high. This simple strategy says everything, but is only used by a few people. There is to make money with options and futures, but that’s reserved for traders, not investors.
These are the four key elements that made John Templeton, one of the most successful investors of our time.
Investing tip # 1. Invest For Maximum Total Real Return
This means the return on invested dollars after taxes and after inflation. This is the only rational objective for most long-term investors. It is vital that you protect purchasing power. One of the biggest mistakes people make is putting too much money into fixed-income securities.
If inflation averages 4%, it will reduce the buying power of a $100,000 portfolio to $68,000 in just 10 years. In other words, to maintain the same buying power, that portfolio would have to grow to $147,000-a 47% gain simply to remain even over a decade. And this doesn’t even count taxes.
Investing tip # 2. Invest-Don’t Trade Or Speculate
The stock market is not a casino, but if you move in and out of stocks every time they move a point or two, or if you continually sell short… or deal only in options…or trade in futures…the market will be your casino. And, like most gamblers, you may lose eventually—or frequently. You may find your profits consumed by commissions.
Long-term owners of stock are usually better informed and more understanding of essential values; they are more patient and less emotional; they pay smaller capital gains taxes and the don’t incur unnecessary brokerage commissions
Investing tip # 3. Remain Flexible And Open-Minded
There are times to buy blue chip stocks, cyclical stocks, corporate bonds, U.S. Treasury instruments, and so on. And there are times to sit on cash, because sometimes cash enables you to take advantage of investment opportunities.
The fact is there is no one kind of investment that is always best. If a particular industry or type of security becomes popular with investors, that popularity will always prove temporary and-when lost-may not return for many years.
Investing tip # 4. Buy Low – sell high
When prices are high, a lot of investors are buying a lot of stocks. Prices are low when demand is low. Investors have pulled back, people are discouraged and pessimistic. This is foolish, but it is human nature. It is extremely difficult to go against the crowd—to buy when everyone else is selling or has sold, to buy when things look darkest, to buy when so many experts are telling you that stocks in general, or in this particular industry, or even in this particular company, are risky right now.
By definition, you can’t outperform the market if you buy the market. And chances are if you buy what everyone is buying you will do so only after it is already overpriced.
Source: ValueWalk
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