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All investors should read this book
Even if Sir John Templeton’s strategy is not one you want to follow yourself, the tips and the story of how he made billions are well worth the read, says Matthew Partridge.
Sir John Templeton, who died in 2008 aged 95, was a man of apparent contradictions. He gave up his US citizenship to avoid taxes, but went on to win a knighthood for philanthropy.
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He took a similar approach to managing money. While others focused on either fast-growing firms, or finding cheap shares, he successfully combined elements of both growth and value investing.
In this book on Templeton, described as "part biography, part investment advice", financial writer Jonathan Davis and fund manager Alasdair Nairn (who worked with Templeton) look at his background, his track record, and analyse his "16 rules for investment success", showing how you can apply them to your own portfolio.
Templeton's career can be roughly split into two stages. After a stint on Wall Street and with an industrial company, he set up an investment advisory firm. But by the mid-1950s, Templeton had begun to get involved in running money directly. In 1954 he founded the Templeton Growth Fund, which he ran until 1992 (the fund is still around).
Although it was sold to American investors, it was one of the first funds to focus on global markets. Indeed, the holdings of US shares fell to 16% at one point, far lower than the US market's size would have justified, especially in the first two decades. During his 38 years in charge the fund beat global markets by an average of 3.7% a year.
Of course, Templeton was not immune to error. Up until he moved to the Bahamas in 1968, his fund grew more slowly than a hypothetical world index. As the writers note, the fact that he worked better when away from Wall Street suggests that being outside the finance industry "bubble" can help investors think independently. Meanwhile, his decision largely to exit the Japanese market by the end of the 1970s saw him miss out on the 1980s boom.
However, it also meant that he was not hit when the bubble collapsed, showing the value of sticking to a strategy. Templeton was also a realist. Despite his accomplishments as a stock picker, he acknowledged that "outperforming the market is difficult", and that index-tracking funds had their uses.
Mark Mobius, who runs a major Templeton fund, says the book "explains brilliantly how and why [Templeton] was able to put together his phenomenal track record, and what we can learn from him". Meanwhile, James Montier of GMO reckons that "anyone calling themselves an investor should read this book". We'd agree even if Templeton's strategy is not one you want to follow yourself, the tips, as well as the story of how he made billions, are well worth the book's price.
Templeton's Way with Money by Jonathan Davis and Alasdair Nairn is published by John Wiley & Sons, price £26.99.
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