Thursday, July 25th, 2024

Investing is not like most activities in normal life

August 19, 2014 by  
Filed under Investing, Investor Behaviour

Part of the reason the average investor fares so poorly when trying to do it alone is the challenge of controlling emotions and applying a rational and consistent investment philosophy – an objective discipline that leads to correct decisions most of the time.  Since there are so many investors who do not apply such a philosophy, it creates opportunities for those who do. The approach known as “value investing” is one that seeks to benefit from the large errors of others. Sir John Templeton was a pioneer in value investing and most likely the people who manage your mutual funds follow many of the tenets Sir John used in his long and successful career.

Sir John Templeton 2“ In almost every activity of normal life people try to go where the outlook is best. You look for a job in an industry where the outlook is best. You look for a job in an industry with a good future, or build a factory where the prospects are best. But my contention is if you’re selecting publicly traded investments, you have to do the opposite. You’re trying to buy a share at the lowest possible price in relation to what that corporation is worth. and there’s only one reason a share goes to a bargain price—because other people are selling. There is no other reason. to get a bargain price, you’ve got to look for where the public is most frightened and pessimistic.”
Sir John Templeton, January 1995


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