Global investor's golden rules

Mark Mobius, executive chairman of Singapore-based Templeton Asset Management, brings his experience in emerging markets to Thai players.

Before the sub-prime crisis broke out in the United States last year, fund managers and small investors were keen to buy financial assets such as stocks in developed countries.

Visit Tantisunthron, secretary-general of the Government Pension Fund (GPF), then said less volatility in mature markets was a good a reason to invest in US and European stocks.

Lately, the GPF and other investors have turned their attention to emerging markets, in particular Brazil, Russia, India and China.

Visit and other fund managers recently had dinner with Mobius, who is dubbed "the Indiana Jones" of global investing and "king of the emerging-market funds".

Mobius's tales of investment in emerging market over two decades appear in his book "Passport to Profits". In it, he talks about his 84 rules for finding good companies and good stocks.

The first 25 rules deal with general guidelines for any investor who wants to put money in emerging-market shares. In his book, he makes some views contrary to those of investors who prefer to hold shares in a few good companies.

For example, the world's richest investor Warren Buffett often says too much diversification of your portfolio might mean you may not be able to remember all the areas you are invested in.

Mobius, however, believes your best protection is more diversification. This is because his position was once hurt when he kept a larger exposure in just one area: Hong Kong stock. He made the error during his early days in investing.

His research into many companies in emerging markets has enabled him to hold a large number of companies in his portfolio. He also has about US$2 billion (Bt65 billion) in the Thai equity market.

The investments are broad-based. But Mobius warns players that "there is no simple secret, no single blueprint, no rigid road map, that guarantees long-term success as a global investor."

But it would help to follow some simple rules, such as:

1. Your best protection is diversification.

2. Taking risks is what you get paid for.

3. If you want to gain exposure to the world's fastest-growing economies, you've got to take the plunge into emerging markets.

4. High volatility is a characteristic of all markets, even more mature ones.

5. If you factor emotion out of the equation, and base your strategy on long-term fundamentals, you can win when markets fall and when they rise.

6. Wait five years, and call me in the morning.

7. Bad times can be good times.

8. Lies can be as revealing as pure, honest truth, provide you know what cues to be looking and listening for.

9. By the time most of the data prepared by multinational institutions and governments become available, it's already factored in stock prices.

10. Buy "good" stock in "bad" times, and "bad" stock in "good" times.

11. Times that people think are bad are often good.

12. Stocks that people think are bad are often good.

13. Countries that make it easy for travellers to enter tend to be friendly to foreign investment.

14. The quality of management is paramount.

15. Buy wet (liquid) stocks in wet (liquid) countries, not dry (illiquid) stocks in dry (illiquid) countries.

16. Patience is more than its own (just) reward.

17. Long-term planning pays.

18. The time of maximum pessimism is the best time to buy.

19. The time of maximum optimism is the best time to sell.

20. If you can see the light at the end of the tunnel, it's too late to buy or sell.

21. You earn dividends by discounting a market's "emotional quotient".

22. Buy stocks whose prices are going down, not up.

23. If a market is down 20 per cent or more from a recent peak and value can be seen, start loading up.

24. Time heals most ills.

25. Privatisation primes the pump.