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Say a prayer, buy low

Mutual fund pioneer had an eye for underpriced stocks, emerging markets and a fondness for Canada that was fiscally practical

It's 1939, and American investors are worried about protecting their portfolios. Not John Templeton. He was busy buying undervalued European stocks as the continent teetered on the brink of war.

Mr. Templeton bought shares in 104 European companies listed in New York - only four of the investments didn't work out - and that cemented his reputation as a stock picker with global savvy who would revolutionize the mutual fund industry.

Nowhere would that reputation loom as large as in Canada, where he incorporated his Templeton Growth Fund in 1954 - essentially founding the country's mutual fund industry - and introduced investing to the masses.

Mr. Templeton died of pneumonia yesterday in the Bahamas at 95.

"He was a major, major presence in the industry who emphasized a long-term track record," said Jonathan Wellum, chief executive officer of AIC Ltd.

"He really brought the whole market to Main Street in a disciplined fashion. All of us in the investment industry have been able to take advantage of his approach and stand on his shoulders."

Prior to the popular introduction of mutual funds, investors purchased individual stocks for their portfolios. Costly transaction fees made it prohibitive for the average family to invest, but Templeton Growth allowed them to buy into a globally diversified fund easily. And since Canada didn't have a capital gains tax until 1972, investors pocketed more of the returns.

"He was without a question one of the pioneers in global investing," said Don Reed, CEO of Toronto-based Franklin Templeton Investments Corp.

"He believed that you could find more good ideas to invest in by looking in many places than just one," Mr. Reed said.

By the late 1980s, the Templeton name had become synonymous with the Canadian fund industry, and Templeton Growth was the only fund with cachet and recognition.

"If you said you were in the mutual fund industry, they would say 'Oh, like Templeton,' " said Bill Holland, CEO of CI Financial Income Fund.

Mr. Templeton ran Templeton Growth until May, 1987, when he handed it over to his 27-year-old research assistant Mark Holowesko. "It was quite a shock," recalled Mr. Holowesko, now a hedge fund manager and partner in Nassau-based Holowesko Partners Ltd.

"He walked into my office at around 10:30 a.m. He laid the accounts on my desk, and said, 'From now I'd like you to pick the securities for these, and write up the tickets and leave them on my desk.' "

Mr. Templeton would sell the company in 1992 to San Mateo, Calif.-based Franklin Resources Inc. for $440-million (U.S.). Until the sale, Templeton Growth had a average annual return of 14.5 per cent.

"His [Mr. Templeton's] passion was his work," said Mr. Holowesko, who continued to run Templeton Growth until 2001. "He was extremely demanding and worked six-and-a-half days a week."

Born in Winchester, Tenn., Mr. Templeton developed a strong Christian faith that would define his career and guide his philanthropic efforts. He founded the Templeton Prize in 1972 to encourage "progress in religion." The dollar amount has gradually increased over the years to ensure it remains a greater monetary reward than Nobel offers. Philosopher Michal Heller received the $1.6-million prize in 2008 for his work to reconcile the "known scientific world with the unknowable dimensions of God."

In 1987 - the year he was knighted by Queen Elizabeth - Mr. Templeton founded the John Templeton Foundation, which funded projects that brought science and religion together. It has handed out more than $1.5-billion to date, with $70-million in annual grants distributed.

His foundation was a reflection of his faith - he was active as a Presbyterian elder and sat on the board of the Princeton Theological Seminary and the American Bible Society.

Canadian value investor Peter Cundill of Mackenzie Cundill Investment Management said he learned a great deal from Mr. Templeton's approach to life and investing.

"He mentored me, along with many others, and I am extraordinarily grateful for his help and the contribution he made to the world," Mr. Cundill said.

Thomas Caldwell, chairman of Caldwell Asset Management Inc., said Mr. Templeton's faith was a beacon to others in the investment industry who often feel they have to separate church and boardroom. There was no such distinction for Mr. Templeton, who would start each meeting with a prayer.

"I consider myself a practising Christian, and there are a lot of people in the securities industry with strong faith. But I think there are a lot of other people who worry if you say that you'll get tagged as some kind of weirdo," Mr. Caldwell said. "But religion is all about humility. We are all fallible temporal beings trying to do the very best we can, and sometimes it's good that we remember that."

TEMPLETON'S RULES OF INVESTING

1. Invest for maximum total real return

2. Invest - don't trade or speculate

3. Remain flexible

4. Buy low

5. Search for bargains among quality stocks

6. Buy value, not market trends or the economic outlook

7. Diversify

8. Do your homework or hire wise experts to help you

9. Monitor your investments

10. Don't panic

11. Learn from your mistakes

12. Begin with a prayer

13. Outperforming the market is a difficult task

14. An investor who has all the answers doesn't even understand all the questions

15. There's no free lunch

16. Do not be fearful or negative too often

© 2007 The Globe and Mail. All rights reserved.

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