Books: On Investing the Templeton Way

One word sprung to mind repeatedly as I read Investing the Templeton Way: courage. Simply put, courage defined the life and times of the renowned global value investor Sir John Templeton, and reading about how he approached investing left me both impressed and inspired.

Born in 1912 in the small town of Winchester, Tennessee, Templeton would go on to pioneer the idea of global investing. He was exceptional from the word go, managing to attend (and largely pay for on his own) college at Yale. He also became a Rhodes scholar, and traveled extensively in Europe, the Middle East, and Asia.

This insatiable curiosity and drive would lead him to work hard throughout his long career to uncover the best investment bargains worldwide. Well before U.S. investors were willing to look overseas for undervalued companies and markets poised to prosper, Templeton was actively researching and buying shares in foreign countries.

Templeton was focused first and foremost on uncovering bargains. By allowing himself to look outside the U.S., he was able to profit handsomely when U.S. stocks were overvalued. He didn’t place needless geographical limits on himself. He simply followed his research into the best places, and as a result, built a fortune by being brave enough to do things most investors would find unthinkable.

For instance, he recognized after World War II that Japan was transforming itself into a global powerhouse. This was not the view held by the majority at the time, given the country’s WWII defeat. But he presciently saw the future for Japan and began investing in the 1950s in the country – and, just as importantly, he got out after everyone else caught on to the Japanese story in the 1980s, moving his money to bargains elsewhere.

One of the greatest lessons from Templeton can be found in this quote from him: “If you want to have a better performance than the crowd, you must do things differently from the crowd.” That sounds a lot easier than it is, though. It takes courage to build a career by doing what others are too scared to do.

Written by his great-niece, Lauren Templeton, and her husband, Scott Phillips, who are exceptional investors in their own right, Investing the Templeton Way provides actionable advice for ways to unlock your own bargain-hunting tendencies as an investor. As counterintuitive as this sounds, learning about Sir John Templeton’s ability to think independently as an investor can improve your own ability to do so.

(Originally published here: http://msbusiness.com/blog/2014/08/22/book-biz-inspiring-instructive-look-value-investing-great-investing-templeton-way/)

Books: On Your Money and Your Brain

Thinking back to our high school or college economics classes, most of us probably learned that when it comes to making economic decisions, humans can be trusted to act rationally. We carefully weigh available information, think through the probabilities, and make our decisions based strictly on cold, hard logic.

The truth, as it turns out, is a bit more complicated. Our brains can be our own worst enemies, throwing up roadblocks to smart decision-making and clouding our ability to think clearly. Emotions do come into play when we’re thinking about money, and operating as if they don’t could you leave you poorer without really understanding why.

Luckily, we can arm ourselves with knowledge about how our brains sometime trick us into making bad decisions, and hopefully use that information to battle back against our own worst impulses. Jason Zweig’s book, Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich, will help you do just that.

One of the earliest books published on the topic of neuroeconomics (which combines the fields of neuroscience, economics, and psychology), Zweig’s book reads like a road map to your brain’s dirty tricks. To quote him, “… you will never maximize your wealth unless you can optimize your mind.”

Zweig organizes his book around topics most investors are familiar with: greed, prediction, confidence, risk, fear, surprise, regret, and happiness. He then takes us inside the neural pathways that are connected to these, and the different parts of the brain that are stimulated, and explains why. It’s eye opening, to say the least.

When you realize, for instance, that the pain from a loss is actually much greater than the pleasure you get from a gain, you can begin to take steps to limit your own reactions. You’ll never completely rid yourself of these emotions (and he argues that would be just as damaging to your returns), but knowing why you’re thinking and feeling the way you are will give you a real advantage. Zweig provides actionable steps at the end of each chapter for how to keep your brain in check.

Quoting him again, “When you win, lose, or risk money, you stir up some of the most profound emotions a human being can ever feel.” Taking the steps necessary to learn how your emotions interact with and interfere with your decision-making will undoubtedly enlighten you, and may just enrich you, as well.

(Originally published here: http://msbusiness.com/blog/2014/02/07/book-biz-comes-money-brain-may-worst-enemy/)

Books: On The Little Book That Beats the Market

If you’re looking for a brief and understandable introduction to the complex world of the financial markets, The Little Book That Beats the Market might be for you. Written by hedge fund veteran Joel Greenblatt partly as a way to explain what he does for a living to his five children, it’s an accessible take on stocks and the stock market. And it really is “little,” coming in at just 155 pages. You can easily start and finish this book in an afternoon.

Greenblatt walks through exactly what investors should be looking for when trying to determine if a company’s a good long-term prospect. He does a great job of breaking down the sometimes obtuse subject of accounting by using the example of a fictional chewing gum company to explain topics like inventory costs and margins. From there, he helps readers see that buying stock is more than just tracking a ticker symbol – it’s becoming a part-owner in an actual company.

Essentially, Greenblatt’s book upholds the tenets of value investing by suggesting that readers buy stock in companies that a) are currently undervalued relative to their long-term earnings potential and b) have a healthy return on capital (meaning that when the companies reinvest in their business, they’re earning a high rate of return). Greenblatt also preaches patience and long-term thinking, pointing out that there will be times the market seems to be working against you, but if you’ve done your homework, you must keep your conviction and stand firm.

The book goes further, though, by suggesting that readers follow Greenblatt’s “magic formula” to beat the market. I won’t give it all away here, but it essentially holds that by buying a certain number of companies that meet the aforementioned two criteria, and by buying and selling at the right time, you’ll dramatically outperform the market.

However, even if you’re not looking to tinker with your stock market strategy, this book still has lots to offer. Greenblatt’s suggestions for how to evaluate companies are valuable, and his insights and sense of humor make the book fun to read. His writing style is casual and conversational. This isn’t some typical stuffy finance book.

For both beginners and those with more experience, The Little Book That Beats the Market proves to be a smart investment itself. Give it an afternoon, and you’ll come away with knowledge that will pay for the cost of the book many times over.

(Originally published here: http://msbusiness.com/blog/2013/12/13/book-biz-greenblatt-worthy-fun-read-book-investing/)