Looking for a 'safe investment'?

Country Routes, October 1993

Sir John Marks Templeton who, according to every major fund rating service, is one of the most successful money managers, gives his advice on what is a 'safe investment.'

"I thought about what a Safe Investment was for a long time when I was an investment counsellor. Being an investment counsellor means that you try to adopt a program for each individual client that suits his needs and his wishes and his tax situation. The very nature of investment counselling is to make a tailor-made program to suit the owner. And after working as an investment counsellor for 44 years, I've come to the conclusion that everybody has the same objective. And, the objective is to produce the maximum total return, net after taxes and after inflation."

"Now, it's true that there are some people who say, 'I want safety'." But I believe what they really mean is safety in terms of purchasing power. If you mean you want safety in terms of how many dollars, then you might be wise to invest in guaranteed certificates or a money market fund, because you'll have safety in terms of dollars."

"But 90 per cent of the people don't mean that. What they really mean is they want to have the same purchasing power even after inflation. And our belief is that, in the next 35 years, we're going to have the cost of living 16 times as high as it is today. And, therefore, if you invested in Guaranteed Certificates or a Money Market Fund, you would really suffer. But if you invested in an Equity (Stock) Fund it should at least keep pace with the increase in the cost of living."

"Also, you should not say that a retired person needs a fund that pays a high dividend. What you want for any person is a fund that's going to produce the maximum total return - income plus capital gains. As a person gets older, he may need more income to live on, but he will be wise to invest for capital growth rather than high dividends. The most promising stocks usually pay out little or nothing. So the person who needs safety should invest in a well-managed Equity (Stock) Fund."

There you have it - from one of the most successful money managers in the world!

Two important facts will conclude this article:
1. $1 December 31, 1967 is worth only 20.85 cents December 31, 1992 in buying power due to inflation. (i.e. $4.80 would be required to make a purchase similar to $1 in 1967).
2. $10,000 invested in the Templeton Growth Fund November 29, 1954 was worth $2,348,625 April 30, 1993. Source: Templeton Growth Annual Report.

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