Greatest Contrarian investor.

Value investing can be someone's cup of tea but, contrarian investing requires balls of steel. Contrarian investing is an investment style in which investors purposefully go against prevailing market trends by selling when others are buying and buying when others are selling, based on intuition and supporting data. Berkshire Hathaway Chair and CEO Warren Buffett is famous for his contrarian bets but, the "Father of all contrarian bets" title goes to none other than, Sir John Templeton. 

Contrarian investors believe that people who say the market is going up do so only when they are fully invested and have no further purchasing power. At this point, the market is at a peak. So, when people predict a downturn, they have already sold out, and the market can only go up at this point. As the name implies, contrarian investing is an investing strategy that involves going against the grain of investors sentiment. The principle behind contrarian investing can be applied to individual stocks, an industry as a whole, or even the entire market. "To buy when others are despondently selling and to sell when others are euphorically buying takes the greatest courage but provides to greatest profits" quotes Sir John Templeton. 

The person who started global investing, who started contrarian investing, died rich and wealthy at the age of 95. It gives a huge advantage to stick to your own philosophy and live until your 90's. Here are 8 greatest lessons chronicled by Sir Templeton. 

1. ALL INVESTING IS GLOBAL: 
    Templeton became famous in America for promoting the idea of global diversification, but he didn't invent the concept. After studying law as a Rhodes Scholar at Oxford, Templeton embarked on a whirlwind journey that took him to 35 countries in seven months. In his travels, Templeton simply noticed that there were far too many opportunities outside the U.S. to ignore. And that was back in the 1930s. To this day, academics and financial advisers use fancy equations and pie-charts to justify the case for international investing. For Templeton, it was always just common sense.


2. ALWAYS TAKE A CINTRARIAN APPROACH: 
    "People are always asking me where the outlook is good, but that's the wrong question," Templeton explained to Forbes in 1995. "The right question is: 'Where is the outlook most miserable?' " This is Templeton's famous "principle of maximum pessimism." It runs counter to almost every other big decision we make in life: choosing a company to work for, a neighborhood to live in or a person to marry. But that's what makes investing so difficult and the reward for successfully betting against the crowd so compelling. 

3. BUT MAKE SURE THE FUNDAMENTALS ARE INTACT: 
    Identifying out of fashion sectors or countries is merely a starting point. The corollary to the principle of maximum pessimism is that the underlying, long-run fundamentals must be sound. Pessimism once ran high at Bear Stearns, and for good reason.


4. LET VALUATION BE YOUR GUIDE: 
    Many "sophisticated" international investors insist on divvying up the world into a catalogue of developed, emerging and frontier markets, based on Morgan Stanley Capital International's classification system. But Templeton had already made a killing in Japanese stocks in the 1960s before MSCI even existed. Was Japan developed or emerging back then? It didn't matter. Its stock market traded at four times earnings and the Japanese economy was growing like gangbusters.


5. DON'T BE AFRAID TO BET BIG: 
    At one point in the 1960s, Templeton held more than 60% of the Templeton Growth Fund's assets in Japan, an allocation that would get a manager fired on the spot at most mutual fund houses today. That's an extreme example, but investors shouldn't be afraid of bold bets whenever their research uncovers a big opportunity. Besides, Templeton wasn't a big fan of investment committees anyhow: "I am not aware of any mutual fund that was run by a committee that ever had a superior record, except accidentally." 


6. DON'T RUN INTO POSITIONS: 
    Templeton was an investor, not a trader. But even for patient investors, it can be frustrating to watch a cheap stock get even cheaper before the rest of the crowd catches on. Bottom fishers in IT stocks today know this all too well. On this Sir Templeton said that always put your new investment ideas on a watch list, or take a small position before rushing in. If it's a truly great bargain, there's no need to hurry.


7. GET AWAY FROM THE CROWD: 
    "Outstanding performance cannot come from someone who is always part of the herd." While Templeton meant this in the sense of being a contrarian, he physically distanced himself, too. One of his early investment partnerships, Templeton, Dubbrow & Vance, was in the heart of Manhattan at Rockefeller Center, but Templeton spent the latter part of his career in the Bahamas, where he moved in the 1960s. Avoiding U.S. taxes was the big reason, but Templeton frequently cited the distance from Wall Street's noise as an advantage to his decision-making. And this was in the days before Bloomberg terminals, BlackBerrys and CNBC.


8. DON'T WORRY ABOUT TH EDIRECTION OF THE MARKET: 
    On this, Sir Templeton said, "I never ask if the market is going to go up or down because I don't know, and besides it doesn't matter. I search nation after nation for stocks, asking: 'Where is the one that is lowest priced in relation to what I believe it is worth?' Forty years of experience have taught me you can make money without ever knowing which way the market is going."
    

There is so much in life that we cannot control. Templeton couldn't be sure that the allies would prevail in World War 2. He could never have predicted that his first wife would die young. But he controlled what he could control. As an investor, that meant focusing with remorseless discipline on valuations, on gathering information than his rival possessed, on making fiercely independent judgement with no concern for the taste of the tribe. It also meant doing everything in his power to maintain his mental and emotional equilibrium. He couldn't control the outcome, but he could control himself. Templeton has famously said that if you want to live successfully outside, then first live successfully inside. 

Happy Investing.