What John Templeton got right and what modern investors are still missing, explains Saurabh Mukherjea

At a time when investors are encouraged to double down on what they know best – one market, one asset class – Saurabh Mukherjea argues for the opposite. In his recent article, the founder of Marcellus Investment Managers turned to Sir John Templeton, the legendary 20th century investor, to argue that global diversification, contrarian thinking and emotional discipline are not fashionable but sustainable ideas.Mukherjea based his argument on a simple behavioral flaw: that investors tend to repeat past successes rather than seek equilibrium. “Our brain’s desire for dopamine makes diversification very difficult,” he said, noting that investors profiting from a well-known asset often struggle to deploy capital into uncorrelated assets. That instinct, he argued, has been elevated to doctrine, celebrated as “sticking to your circle of competence” or, in its retail form, “homeland” bias.

Against this backdrop, Mukherjea traced the origins of a truly global investment mentality to Sir John Templeton (1912-2008), whom he described as ‘the first investor to invest globally on a serious scale’. Long before diversification became an academic orthodoxy, Templeton deployed capital across continents, decades before modern portfolio theory.

A career built on looking elsewhere

Born in a small town in Tennessee at the turn of the 20th century, Templeton was shaped by scarcity and self-reliance. According to a profile cited by Mukherjea, he worked his way through Yale during the Depression, financing his education in part with poker winnings, before earning a Rhodes Scholarship to Oxford. Extensive travel followed, an experience that Mukherjea believes proved crucial in shaping Templeton’s global worldview.

When Templeton began his career as an investment adviser in New York in 1937, he saw a gap that others ignored. “I couldn’t find a single advisor who specialized in helping people invest outside of America. So I saw a big opportunity,” Templeton said of his early years.

That vision defined his most famous early decision. In September 1939, as war broke out in Europe and the markets crashed, Templeton borrowed $10,000 to buy 100 shares each of 104 U.S. publicly traded companies trading for $1 or less, including dozens that had gone bankrupt. All but four ended up making a profit. Later he explained the logic succinctly: “During war, everything that was in surplus and therefore unprofitable becomes scarce and profitable.”

Templeton would later distill that philosophy with characteristic bluntness: “If people are desperately trying to sell, help them and buy. If people are enthusiastically trying to buy, help them and sell.”

Five principles that defined Templeton

Drawing on books and historical accounts, Mukherjea outlined five principles that he believed defined Templeton’s success. The first was global diversification. Long before Harry Markowitz formalized the benefits of diversification, Templeton allocated capital among countries with low correlation to each other. His flagship Templeton Growth Fund, launched in 1954, would outperform a global stock index by an average of three percentage points per year over his career, according to material cited by Mukherjea.Secondly, there was contrarian investing, buying at ‘points of maximum pessimism’. Templeton invested in European companies during the darkest days of World War II and was among the first American investors in postwar Japan.

The third pillar was classic value investing. Despite the “growth” label, Templeton avoided stocks he considered expensive, defining that as a five-year price-to-earnings ratio of more than about 12 to 14 times. He owned undervalued companies until they approached fair value, and then regarded ownership as speculation rather than investment.

Fourth was emotional discipline. By living a stable life outside the markets and relying on quantitative signals developed as early as the late 1930s, Templeton avoided the anxiety that bad timing creates. These signals, Mukherjea noted, helped him exit tech stocks before the dot-com bubble burst.

Finally, Templeton had a deep faith in historical patterns. He cautioned against assuming that current conditions are fundamentally different from those in the past, arguing that markets repeatedly punish this belief.

Relevance for investors today

Mukherjea argued that Templeton’s philosophy remains particularly relevant to Indian investors. A portfolio focused on the United States, he says, is “NOT a country choice,” but an exposure to the world’s most consistent sources of corporate profits and innovation, including artificial intelligence, cloud computing and semiconductors.

For Mukherjea, Templeton’s lasting lesson is not tactical but behavioral. Diversification, contrarianism and discipline are rarely worth it at this point. History suggests they are rewarded over time.

Also read | Three categories of equity funds are offering returns of more than 10% so far in 2025. Will 2026 be the same?

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of the Economic Times.)