Dare To Be A Great Investor

Bear markets separate the so-so investors from the great ones. During bull markets, it’s fairly easy to post solid numbers year-after-year in a portfolio. But who is still standing when the stuff hits the fan?

Great investors are made through adversity. Market sentiment is usually so negative that only those with guts to wade in are rewarded.

Timing is also everything in investing.

What would John Templeton’s career have been like if it wasn’t shaped by the stock market of the Great Depression? In the same vein, Warren Buffett made his fame by going on a buying binge during the Super Bear Market of 1972-1974.

Great investors emerge when the going gets tough because that’s when the talent rises to the top.

But both of these men, considered by many to be among the great investors of the last 75 years, also have characteristics that fueled their greatness.

Warren Buffett, in his search for his successor to run Berkshire Hathaway, said that the key characteristics he was looking for were:

1. Independent thinking 
2. Emotional stability 
3. A keen understanding of both human and institutional behavior

Do you have what it takes?

Be a Contrarian

John Templeton was born in Tennessee but ambition took him to Yale University, where he put himself through college during the Great Depression.

He started his career on Wall Street at the worst possible time, in the late 1930s. Stocks had already crashed during the Depression, but hadn’t recovered. It wasn’t exactly the 1920s on Wall Street.

In 1939, with the world going to war, he borrowed money to buy 100 shares each of 104 companies that were selling at $1 a share or less. Some might have thought he was crazy. 34 were in bankruptcy at the time. Ultimately, only 4 of the companies ended up being worthless and the rest went on to large profits.

One key to Templeton’s success was investing where others were not. “The other boys at Yale came from wealthy families, and none of them were investing outside the United States, and I thought, ‘That is very egotistical. Why be so shortsighted or near-sighted as to focus only on America? Shouldn’t you be more open-minded?’” he said.

Later in his career, as he ran the Templeton mutual funds, Templeton was one of the first to invest heavily in companies outside of the United States, especially in an emerging Japan. He, and his customers, made large profits by doing so.

Timing is Everything

Warren Buffett hasn’t always been in the markets. In 1969, as stocks were heating up Buffett cashed out of all of his holdings, telling Forbes Magazine in 1974, “When I got started the bargains were flowing like the Johnstown flood; by 1969 it was like a leaky toilet in Altoona.”

But by 1974, after two years of stock market carnage, Buffett was back in the game. Forbes asked him what he felt about the markets that year: “Like an oversexed guy in a harem,” he shot back. “This is the time to start investing.”

By the time the interview was set to run in the magazine, the markets had rallied 15% and Forbes asked him if he was still feeling the same way.

“I don’t know what the averages are going to do next,” he replied, “but there are still plenty of bargains around.” He told Forbes that the situation reminded him of the early 1950s.

Sound familiar?

Recently, Buffett was back to his predicting ways, telling the New York Times on Oct 16: “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors.”

Patience is key to great investing. Templeton and Buffett added to their portfolios during the worst days of the stock market and waited it out. Templeton held his 1939 investments on average for 4 years.

Bear markets are opportunities to elevate your investing game. Don’t settle for being just an average investor. Dare to be great.

Subscribe by RSS Subscribe by Email