John Templeton's Five Steps for Financial Success

Shop for value investments. Templeton follows the fundamental "bargain-hunting" approach to investing. "The long-range view requires patience." His Templeton Growth Fund, which he ran for 50 years before turning it over to the Franklin Group, held stocks for an average six to seven years. He always searched for companies around the world that offered low prices and an excellent long-term outlook. "It's not easy," he states, "but if you're going to buy the best bargains, look in more than one industry, and look in more than one nation."

Under Templeton's managing skills, the Templeton Growth Fund averaged a 14% annualized return over 50 years, far outperforming the stock market indices.

Templeton rejects the "technical" method of trading stocks. "You must be a fundamentalist to be really successful in the market," he says. I agree. The best technicians make the most profitable trades in companies with sound fundamentals in sales and earnings.

Take advantage of international free markets. Templeton believes a "free enterprise" approach is mandatory when investing overseas. "Avoid investing in those countries with a high level of socialism or government regulation of business," he says. "Business growth depends on a strong free-enterprise system." He told me that he is a follower of free-market economists Ludwig von Mises, Friedrich Hayek and Milton Friedman. "Governments should stop interfering with what people want to do."

Templeton took a 'round-the-world tour in 1936, and he was struck by the poverty in India and Hong Kong. When he returned 40 years later, he noted a sharp contrast. "The standard of living in Hong Kong has multiplied more than tenfold in 40 years," he said, "while the standard of living in Calcutta has improved hardly at all. The major difference is between free enterprise and socialism. The Indian government regulates nearly everything, so there's very little progress; whereas in Hong Kong, the government keeps its hands off."