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January, 2012


Sir John Templeton was a master investor in the value investing tradition who became wealthy by seeking the best bargains available wherever they might be found in the world and, over several decades, averaging about a 5% per year better total return than was available at the same time from the major U.S. market averages. Although he died at age 95 in the 1990s, his investing philosophy has been continued in the Franklin Templeton Investments company, which manages several mutual and closed-end funds. One might do far worse than to acquire and invest a large proportion of one's stock and bond exposure in a portfolio of solid Templeton funds. There are in my view enough superior performers among them to adequately diversify one's non-U.S. liquid holdings while gaining a significant total return benefit over, for instance, that of the Standard and Poors 500 Index.

Here are a few examples:

Closed-End FundFund
Templeton Dragon FundTDF$27.1020.53%
Templeton Emerging Markets FundEMF$19.2216.24%
Templeton Emerging Markets Income FundTEI$15.6313.22%
Templeton Global Income FundGIM$9.4814.27%
Templeton Russia and East European FundTRF$14.7013.13%

The annual returns indicated are 10-year averages. A 20% each allocation of one's investment dollars in those Templeton assets ten years prior would have averaged a total annual return, through 1/17/12, of 15.48%.

I do not recommend putting all one's investments into overseas or global funds. I have, on the other hand, heard it recommended that one target 20-50% of one's liquid holdings in foreign securities, given that markets outside the U.S. often have greater potential for growth than domestic ones. Bear in mind, however, that they can be more volatile than U.S. markets. Thus it is wise to begin with extra reserves, so additional investments may be made at relatively low prices during the inevitable market dips. Others may suggest different rebalancing intervals. My own advice would be to review one's allocations and correct them back to the target levels once a year or after a decline in any portion of the portfolio of 10% or more.

Notwithstanding the at times marked ups and downs of both global bonds and stocks, they may be very fruitful places to invest. A $2,000 net investment in each of the cited Templeton funds ten years earlier, i.e. $10,000 altogether, if all distributions were reinvested and the assets were protected from taxes in a 401k plan account or an IRA, would have been worth $42,175 as of the close of trading on 1/17/12.

As always, though, no guarantee can be made of future returns, and investors are advised to do their own research and/or consult a trusted financial advisor before purchasing any assets.

Primary Source: CEFA - Closed End Fund Association; as updated 1/18/12.


Larry is not a professional. Don't take him seriously!

Actually, the investment article provided here is for general information only and should not be considered as professional advice, a solicitation to buy or sell any security, or the Word of God. Investors are encouraged to do their own research while considering their personal goals and circumstances, or consult their own professional financial advisors, before making investment decisions. Neither Larry nor LARVALBUG will be liable for any losses sustained by any visitor to this site.

(Disclosure statement: Larry and Val have holdings in some of the suggested assets but do not "make a market" in any of them and do not derive any direct benefit from recommending them, except perhaps for a bit of smug self-satisfaction.)

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