When you have a lot of problems you also have a lot of opportunity. This is the message Capital and Crisis editor Chris Mayer takes from the life of legendary investor and mutual fund pioneer John Templeton. Templeton said the best time to buy assets is during points of “maximum pessimism” – a concept many investors struggle with…

Born and raised in rural Tennessee, Sir John was the first person in his town to go to college. He went to Yale during the great depression and when things got tight, his father could no longer keep him there. So he helped pay his own way through college with his poker winnings, which sort of adds to his legend. He eventually went on and won a Rhode Scholarship, went to Oxford and set up in Wall Street in 1937.

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Now, you can imagine what the world look like in 1937; a lot of bad news, the Great Depression, war looming on the horizon. And in this environment of chaos, Sir John got to work.

One of his famous bets came to him in 1935 when he bought 100 shares of every stock trading for less than a dollar in the NYSE. He made four times his money in the next four years. That was sort of a pattern throughout his career. He was always an investor who was able to find the opportunity during times of market upheaval.

He famously bought stocks the day after the ‘87 crash, for example. He also bought airlines after 9/11 and made a lot of money in a short amount of time.

So I think he is a good investor to focus on these days because, as investors, we have so many problems to deal with in the marketplace.

I also want to say he started his famous fund in 1954 and it was incorporated in Canada because there was no capital gains tax there at the time. And during 1954–1992 he racked up an average return of 15% a year. That’s a great track record over a long period of time.

He also offered a lot of phrases that we take for granted as common sayings today. “‘It’s different this time,’ are the most expensive words in the English language.” That’s Templeton’s. Maybe his most famous saying is: “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” He later added that the best time to buy is during points of “maximum pessimism.”

When I think of Templeton’s influence on me, I think of two things. One is that he was one of the first really successful investors to invest overseas. He was an early investor in Japan, for example, and he drove home the idea that a quality investment idea doesn’t have to be large, U.S. blue-chip company. He was equally at home investing in South Africa, Australia, Japan, wherever. The second thing I think of is that he had this focus on finding great opportunities even when markets seemed like a really bad place to be.

He wrote this when he was approaching his 95th birthday: “Throughout history, people have focused too little on the opportunities that problems present, both in investment and in life in general. The 21st century offers great hope and glorious promises. It is perhaps a golden age of opportunity.”

Source: Glass Half Full