Sir John Templeton’s Rule No. 1: Invest for maximum total real return

This means the return on invested dollars after taxes and after inflation. This is the only rational objective for most long-term investors. Any investment strategy that fails to recognize the insidious effect of taxes and inflation fails to recognize the true nature of the investment environment and thus is severely handicapped.

It is vital that you protect purchasing power. One of the biggest mistakes people make is putting too much money into fixed-income securities. Today’s dollar buys only what 35 cents bought in the mid-1970s, what 21 cents bought in 1960, and what 15 cents bought after World War II. U.S. consumer prices have risen every one of the last 38 years. If inflation averages 4%, it will reduce the buying power of a $100,000 portfolio to $68,000 in just 10 years. In other words, to maintain the same buying power, that portfolio would have to grow to $147,000 — a 47% gain simply to remain even over a decade. And this doesn’t even count taxes.

"Diversify. In stocks and bonds, as in much else, there is safety in numbers."