Tuesday, December 14, 2021

Templeton Re-Balancing Program: Decrease stocks from 45% to 35% now. Plus program for December 2022


Sir John Templeton used to give his clients a yearly program at the beginning of the year. If at the end of the year the Dow Jones had increased significantly, they should lower the percentage of their wealth held in stocks. On the other hand, if prices have become more attractive it makes sense to increase the percentage held in stocks AFTER stock prices have decreased. 

As Warren Buffett puts it: “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.”

Since December 16th last year (below) the MSCI World index https://www.msci.com/world (USD) has increased from $2645 to $3130 an increase of 18%. 

According to the adapted John Templeton re-balancing program, I made last year, your percentage of wealth allocated to stocks today should decrease to 30%. Because it is just at the edge (and I don't want people to sell too many ValueMachinesFund units) I would say reduce exposure to shares to 35% now. 

The program for 2022 includes an increase in the normal zone compared to 2021 of 10% because of inflation and an expected increase in the value of companies.

"There is only one cure for terminal paralysis: you absolutely must have a battle plan for reinvestment and stick to it. Since every action must overcome paralysis, what I recommend is a few large steps, not many small ones. A single giant step at the low would be nice, but without holding a signed contract with the devil, several big moves would be safer. This is what we have been doing at GMO. We made one very large reinvestment move in October, taking us to about halfway between neutral and minimum equities, and we have a schedule for further moves contingent on future market declines. It is particularly important to have a clear definition of what it will take for you to be fully invested. Without a similar program, be prepared for your committee’s enthusiasm to invest (and your own for that matter) to fall with the market. You must get them to agree now ..."

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