Profitable investments... learn the investment basics from Sir John Templeton

Profitable investments are about identifying sustainable long term trends generating handsome return at an acceptable risks level. Before we look into some specific China trends, we should learn some investment basics rules from Sir John Templeton, one of the greatest investors around the globe.

Below are some extracts that are easy to understand but very difficult to execute:

• For all long-term investors, the only objective is to maximize total real return after taxes.
• Achieving a good record takes much study and work, and is a lot harder than most people think.
• It is impossible to produce a superior performance unless you do something different from the majority.
• The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.
• To buy when others are despondently selling and to sell when others are greedily buying... offering the greatest reward.
• In the long run, the stock market indexes fluctuate around the long-term upward trend of earnings per share.
• The time to buy a security is when the short-term owners have finished their selling, and the time to sell a stock is often when short-term owners have finished their buying.
• Too many investors focus on outlook and trend. Therefore more profit is made by focusing on value.
• If you search worldwide, you will find more bargains and better bargains than by studying only one nation. Also you gain the safety of diversification.

Long-term trading...learn the rules from investment gurus

• "The long term is the right term. Short-term fixation on economic and market movements is confusing and often leads to emotional reaction to sell at bottoms and buy at peaks. By focusing on longer term, more stable trends (demographics, globalization, political shifts) an investor gives himself a better change to follow the right road map." said Bill Gross.
• "Short-term trading is a loser's game. Even those with winning trades two-thirds of the time will mostly end up losers since losses on losing trades are usually at least twice as large as the average gains realized." said Steve Leuthold.
• "I do not doubt that some growth investors are very successful. However, the empirical evidence shows that picking winners in terms of growth is exceptionally difficult and fraught with danger (in buying expensive stocks with high embodied expectations obviously opens up considerable downside risk if realty falls short of expectations). In contrast, buying cheap stocks offers a margin of safety against disappointment." said James Montier.

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